Credit Union Vs Bank – Which Is Better For Your Money?

When it comes to storing your money, you can use a credit union or a bank. Which one is better for you and your money?

Many people have made the daring move of taking funds out of their banks and joining a credit union instead. Below are the differences between the two institutions, so you can decide where your money should be.

Banks have a bit of a bad reputation, especially since the world economic crash of 2008. More recently, there have been schemes by banks of opening accounts without their customers’ knowledge or permission. Generally, people are starting to trust banking institutions less than in previous years.

Credit unions provide people with an alternative to traditional banks.

What is a credit union?

A credit union is a money-making cooperative where members borrow from pooled deposits. They are basically non-profit organisations that exist to serve their members, instead of trying to turn a profit.

Credit unions can be small organizations run by volunteers, or larger organizations with thousands of members. Larger credit unions are run by professional boards. Credit unions are usually started by corporations or organizations, specifically to serve their employees or members.

The largest credit union in the U.S. is Navy Federal Credit Union. It has more than seven million members to date.

What are the advantages of a credit union?


  • When you join a credit union, you become a part owner of the union – just as you own a very small part of a company if you buy stocks.  Members can vote to choose the board of directors. They can also vote on decisions that will affect the credit union.
  • Each member has an equal vote, regardless of how little or how much money he or she has in their account. Currently, about one-third of American citizens belong to credit unions.
  • With a bank you are just one customer out of many. Banks are for-profit institutions and their goal is to make a profit for the stockholders of the company. This is why their rates and fees are higher than credit unions.
  • Credit union ATM fees are generally lower than bank ATM fees.
  • Most credit unions can give their members credit cards, just like any normal bank.
  • The credit card annual percentage rates (APRs) are typically lower than bank credit card ARPs. You can make free withdrawals as long as you use a participating ATM.
  • Credit unions offer lower rates on credit cards, mortgages, personal loans, home equity loans, and auto loans.
  • Credit unions typically pay higher interest rates on all deposit accounts like checking accounts, savings, and money market accounts. These rates can be from 4 to 10 times the amount of interest you would receive from a commercial bank.
  • Credit unions offer better customer service in general, as they have smaller branches and long-term members. Many credit unions even assign the same customer representative to its members to each visit.
  • Credit unions offer you flexibility if you have a blemished credit history. As commercial banks process a huge number of applications a month, they make the process faster by having strict requirements on income, credit scores, and deposits. If you don’t meet these requirements, you can be declined immediately. This is not something that credit unions need to do, as they can take members on a case-by-case basis.
  • Most credit unions are uncomplicated, and offer checking and savings accounts with simple terms. You can find unions who offer zero fees on deposits, debit card purchase, and check withdrawal.
  • Some credit unions offer a free savings account, provided you maintain a minimum balance on the account.

What are the disadvantages of a credit union?


  • Credit unions don’t offer as many financial products as larger national banks. Banks offer many different types of checking and savings accounts, many credit cards, loans, and investment products. Credit unions often offer only 1 or 2 types of checking and savings accounts, 1 or 2 credit cards, and 1 or 2 types of loans.
  • Credit unions generally have fewer locations for their branches and ATMs.
  • As well as fewer branches, credit unions often have shorter business hours.
  • Credit unions don’t always keep up with modern banking technology. Commercial banks operate almost entirely online. You can view your current balance, make transfers, apply for credit cards and loans, and pay your bills on one interface. Credit unions generally don’t have the kind of budgets that these resources cost.

Should you use a bank or a credit union?


Credit unions are a great option for basic banking users who simply want to deposit paychecks, pay bills, and shop with a debit or credit card. Many credit union members enjoy the personalized service they get. You can also save hundreds of dollars on fees, or from the lower interest rates on loans and credit cards.

If you want specialized financial products and advanced online services, and many locations for convenience, then a bank is a better option for you.