Banks vs. Credit Unions: Which Is Better?

A mother embraces her daughter as she puts a coin in the piggy bank.

You don't have to bank at a bank. If you're looking for a financial institution to handle your checking and savings accounts, home and auto loans, credit cards or other basic banking services, you can also consider a credit union. Credit unions have been around for more than a century, but many people don't know much about these banking alternatives. If you're unhappy with your big bank or you're curious about working with an alternative financial institution that could lower your costs, credit unions may be worth checking out.

What's the Difference Between Banks and Credit Unions?

Although banks and credit unions offer many of the same essential products and services, there are key differences. Here's a quick take on how the two types of financial institutions stack up:

Banks vs. Credit Unions
BankCredit Union
Checking, savings, credit cards, home loans, auto loansChecking, savings, credit cards, home loans, auto loans
Insured up to $250,000 per account by Federal Deposit Insurance Corporation (FDIC)Insured up to $250,000 per account by the National Credit Union Association (NCUA)
For profitNot for profit
Open to any customerMembership required
More likely to have a wide range of productsMore likely to have free checking accounts
Branches and ATMs nationwideMay participate in national network of shared branches and ATMs

Credit unions are member-owned, not-for-profit financial institutions. Let's unpack this a bit.

What's a not-for-profit financial institution? Banks are in business to make money. Their products and services are structured to take in more money than they cost to administer. Credit unions exist for the benefit of their members. If a credit union takes in more revenue than it needs to fund operations, it returns the proceeds to its members in the form of lower interest rates and fees on loans and higher returns on savings.

Who are a credit union's members? When you join a credit union to do your banking, you become a member and a stakeholder. You have a vote in who sits on the credit union's board and a say in how the credit union is run.

Each credit union has its own membership requirements. Some serve employees of a specific company or members of an employee group, such as firefighters or school employees. Many credit unions are community-based, which means anyone who lives, works or worships within a community may join. Though you're probably not eligible to join every credit union, the Credit Union National Association (CUNA) estimates that 99% of people are eligible to join at least one. One-time membership fees run about $5 to $25, but may be waived. CUNA can help you search for a credit union in your area at

When Should You Choose a Credit Union?

Credit unions are a good alternative if you want a trusted financial relationship with an organization that puts the financial well-being of its members at the center of its mission. One caveat: Joining a credit union is not a uniform experience. The nation's 5,000-plus credit unions range in size, focus and member experience. But while a few may be tiny and quaint, many others have spent recent years upgrading technology and keeping pace with consumer trends.

Here are a few of the best reasons to join a credit union:

  • It has the right account or loan for you. You can try out a credit union without moving all your accounts at once. 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 carbuying service that works in tandem with their auto loan programs. Credit unions usually have good deals on checking and savings accounts as well.
  • They offer financial education or special programs you can use. Financial education is part of the credit union mission. Some offer workshops on skills like budgeting or buying a home. Credit unions that serve employee groups may provide specialized help—for example, retirement advice for government workers with pensions.
  • You're willing to shop for the right digital tools. It's increasingly possible to find a credit union with an excellent online and mobile experience, but you may have to seek it out.

When Should You 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 typically have a wider range of products and services—multiple credit card programs or AI-powered robo-assistants, for example.
  • Size matters. For some people, size simply inspires confidence. It's not necessarily security or access: Credit unions are insured just like banks are. Many provide access to a nationwide network of shared branches and more than 30,000 surcharge-free ATMs. Still, some customers believe a bank that's "too big to fail" is, in fact, less vulnerable—and more likely to come out with products and technologies that entice customers to do more business.

If you prefer the smaller scale of a credit union, you might also look into community banks. These institutions are more intimate and community-focused than big banks and don't have the membership requirement. Compare services, rates and fees to decide if this might be a good option for you.

Which Option Is Best for You?

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 too. If you're considering a new financial institution, remember that you have options. Credit unions are not-for-profit, member-centric organizations that provide essential banking services, often at lower costs. You may or may not decide a credit union is for you, but either way it's good to know you have alternatives.

And since more options are almost always better than fewer, whether you choose a credit union or a bank, you'll improve your loan and credit options if you practice good credit habits. You can start by checking your credit report and score for free with Experian.