By Gayle Sato
Edited by Michelle TipswordBanks vs. Credit Unions: Which Is Better?
Quick Answer
Credit unions are not-for-profit financial institutions owned by their members. They typically offer favorable rates and low fees on loans and accounts. Banks are available to everyone and may offer a wider range of choices.
Banks aren't the only place to do your banking. Credit unions are not-for-profit financial institutions that typically have high rates on savings and low rates on loans and credit cards. Banks and credit unions offer many of the same products and services, though there are a few key differences to understand. Here's a quick rundown of the key features of banks versus credit unions.
| Credit Union | Bank | |
|---|---|---|
| Product offerings | Checking, savings, credit cards, home loans, auto loans | Checking, savings, credit cards, home loans, auto loans |
| Profit model | Not-for-profit and member-owned | For-profit and publicly traded or privately held |
| Insurance | Insured up to $250,000 per account type, institution and account holder by the National Credit Union Administration (NCUA) | Insured up to $250,000 per account type, institution and account holder by Federal Deposit Insurance Corp. (FDIC) |
| Eligibility | You must meet eligibility requirements and become a credit union member to bank at one | Open to all |
| Branch and ATM access | May participate in national network of shared branches and ATMs | Branches and ATMs nationwide |
What Is a Credit Union?
A credit union is a not-for-profit financial institution that provides banking services, such as checking accounts, savings accounts, home and auto loans, and credit cards. Credit unions are tax-exempt membership organizations. To bank at one, you have to meet eligibility requirements and pay a one-time membership fee. Membership fees typically range from $5 to $25, though they may be waived.
Who's eligible to join? Every credit union has a field of membership. Though you probably aren't eligible to join every credit union, chances are good you're eligible to join at least one—and usually more than one. For many credit unions, eligibility is community-defined: Members live or work in the communities the credit union serves. Other credit unions serve employee or occupational groups, such as teachers, firefighters or employees of a specific company.
Pros and Cons of Credit Unions
Though every credit union is different, credit unions as a whole share some common characteristics. If you're considering a credit union, think through these arguments for and against.
Pros
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Not-for-profit model: Credit unions aren't focused on shareholder profits, and they pass their savings along to members in the form of lower rates on loans and credit cards, higher rates on savings, and lower fees.
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Favorable rates: Rates on loans and credit cards are generally lower at credit unions than they are at banks. Annual percentage yields (APYs) on certificates of deposit (CDs, known as share certificates at credit unions), money market, savings and interest-bearing checking accounts are generally also higher at credit unions.
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Lower fees: Credit unions may charge less in fees on items like nonsufficient funds for checking, late payments on credit cards and closing costs on mortgages.
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Community focus: Credit unions seek to serve their member communities, which may translate to charity fundraising and volunteer events, or specialized programs geared toward select employee groups, like summer savings programs that help spread teacher earnings out over the full calendar year.
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Customer satisfaction: According to a 2025 study from J.D. Power, credit unions outscore banks on customer satisfaction by 74 points—729 on a scale of 1,000 versus 655 for banks. Credit unions outperformed banks on every measure in the study, including trust, people and problem resolution.
Cons
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Limited availability: Most credit unions don't have the national scale of big banks. Many are smaller, community-based organizations. You may have to search to find the right one.
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Membership requirement: Many credit unions make it easy to join by including everyone in a given community or offering eligibility to members of select nonprofits. Nevertheless, you'll have to meet eligibility requirements and join up.
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Variable options: The nation's more than 4,000 credit unions range in size, focus and member experience. Many offer excellent mobile and online tools; many more participate in nationwide ATM and shared-branch networks that provide fee-free access. However, individual results will vary, and it's important to shop for the features you need.
What Is a Bank?
A bank is a for-profit financial institution that offers checking, savings, loans and credit cards. Unlike credit unions, banks don't require membership and are open to everyone. Banks are also more common: There were more than 4,462 federally-insured banks representing $24.5 trillion in assets in the first quarter (Q1) of 2025, versus 4,370 credit unions with $2.38 trillion in assets in the second quarter (Q2) of 2025.
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Pros and Cons of Banks
Banks and credit unions aren't so different, but they do have comparative benefits and drawbacks. Here are a few to consider with banks.
Pros
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Wide range of options: Banks come in many shapes and sizes. In addition to big banks, there are independent, regional, community and online banks, available everywhere.
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No membership required: You don't have to meet eligibility requirements or pay for membership at a bank.
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Easy access: Big banks have national branch and ATM networks, mobile apps and online banking to make managing your finances easier.
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Broader selection of products: Although individual variations rule, big banks may be more likely to have the latest technology, international or business banking services, an investment advisory or specialized credit card rewards programs that allow you to earn travel points, cash back and other unique perks.
Cons
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Higher rates and fees: Though this can be a mixed bag as well, banks tend to have higher loan rates and more fees than the typical not-for-profit credit union.
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Lower rates on savings: Banks also pay lower rates on savings, on average, than credit unions. Online banks are an exception here. If you're in the market for a high-yield savings account or high-yield CD, you're likely to find the best rates from an online bank.
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Impersonal experience: Modern banking often revolves around mobile apps, text alerts, online applications, ATM networks and instant payments. If you want a financial institution that feels like it's based on affinity, a big bank might not be the best fit.
What's the Difference Between a Bank and a Credit Union?
The primary difference between banks and credit unions is their business model. Banks are for-profit businesses that operate for the benefit of shareholders. Credit unions are not-for-profit financial institutions owned by members, for members.
Banks and credit unions also have many individual differences. You may find outstanding rates on high-yield CDs or exceptional in-person service at a bank; you may also find fee-free nationwide ATM access and excellent digital tools at a credit union. Whether you're looking for the best rates on a specific type of loan or account, or you're searching for a primary financial institution, consider individual strengths and weaknesses before making a call.
Should You Choose a Credit Union or a Bank?
Choosing a financial institution is highly individual. But, depending on your situation, you may find that one option is a better fit. Remember, too, that you don't always have to choose one over the other. You can open an IRA, for example, at a different bank or credit union without moving your existing accounts.
When to Choose a Credit Union
Credit unions are a good alternative when you want favorable rates on a loan or account, or you're looking for a trusted financial relationship with an organization that focuses on the financial well-being of its members. Here are a few of the best reasons to join a credit union:
- You find the right account, loan or credit card. Credit unions are a great resource for low-cost home and auto loans, and many will work with you to qualify if you're just starting out. Some credit unions also offer a car-buying service that works in tandem with their auto loan programs. Credit unions usually have good deals on credit cards, checking and savings accounts as well.
- You want financial education and help. Financial education is part of the credit union mission. Some offer workshops on skills like budgeting or buying your first home. Credit unions that serve employee groups may provide specialized help—for example, retirement advice for government workers with pensions.
- They have what you need. Whether you've been matched with a credit union while searching for a loan or you're curious what's going on at local branches in your neighborhood, finding and vetting a prospective credit union is important. Take stock of your banking needs and see how they stack up before opening an account at a credit union.
When to Choose a Bank
Credit unions have their advantages, but big banks can also be a good choice—especially if you already have a great banking relationship with one, favor a particular bank that's convenient for you or simply prefer dealing with a national institution. Here are a few more reasons you might choose a bank over a credit union:
- The benefits outweigh the fees. Maybe your current bank has an app you love or credit cards with rewards you're heavily invested in. If so, you may feel that a few extra dollars in fees or a slightly lower savings account interest rate are worth the benefits.
- You want products or services your local credit unions don't offer. Big banks may have a wider range of products and services—multiple credit card programs or AI-powered robo-assistants, for example.
- You're getting a great deal. Trends aside, you may find high-yield savings accounts, industry-beating loan rates or personalized service you love at your local (or national) bank. Check around to find the best deal for you.
Tip: If you prefer the smaller scale of a credit union, also consider community banks. These institutions are more intimate and community-focused than big banks without the membership requirement of a credit union. As always, compare services, rates and fees to decide if this might be a good option for you.
Learn more:6 Signs It's Time to Switch Banks
Frequently Asked Questions
The Bottom Line
Choosing between a bank and a credit union is an individual decision—not just because you're an individual, but because banks and credit unions are individual too. If you're considering a new financial institution, know that you have options. Credit unions are not-for-profit, member-centric organizations that provide essential banking services, often at lower costs. Banks provide a wide range of choices worth exploring, from big national banks to online banks and community banks, each with its own flavor.
Whether you choose a credit union or a bank, you can improve your loan and credit options if you practice good credit habits. Start by checking your FICO® ScoreΘ and credit report for free with Experian.
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About the author
Gayle Sato
Gayle Sato writes about financial services and personal financial wellness, with a special focus on how digital transformation is changing our relationship with money. As a business and health writer for more than two decades, she has covered the shift from traditional money management to a world of instant, invisible payments and on-the-fly mobile security apps.
Read more from Gayle