Which Is Better for Your Money?
What is a credit union, and how does it compare to a traditional bank? Should you keep your money in a bank or a credit union? How do things like fees, rates, access and other key attributes compare? If you are unsure how to answer these questions, this blog will help you understand the differences so you can choose the option that best aligns with your financial goals.
Explore the credit union versus bank discussion by first comparing important factors such as fees, rates, access and other key attributes of each. Both types of financial institutions are beneficial, but the right fit depends on your individual needs and financial preferences.
Credit Unions Versus Banks: What Is the Main Difference?
The main difference between a credit union and a bank is their purpose. Banks are for-profit businesses while credit unions are member-owned financial cooperatives. This means that banks are owned by shareholders and operate with the goal of making money for those who own stock in the company. Only stockholders, not customers, can vote for its paid board of directors.
Credit unions, on the other hand, are owned by their members. Their goal is to help people improve their personal finances and profits are generally reinvested into the organization. This results in lower fees, higher yield savings and better loan rates for members compared to banks. Another distinction is that credit union members also have a vote in the election of its volunteer board of directors.
Both offer checking and savings accounts, loans and credit cards.
Here is a structural comparison list of a credit union versus a bank:
| Feature |
Credit Unions |
Banks |
| Ownership |
Member-owned |
Shareholder-owned |
| Profit Status |
Not-for-profit |
For-profit |
| Board Elections |
Members have a vote |
Only stockholders can vote |
How Do Banks and Credit Unions Compare?
When comparing banks and credit unions, it is important to understand how they differ in areas such as ownership, fees and services:
| Feature |
Credit Unions |
Banks |
| Fees |
Often lower than banks |
May have higher fees |
| Rates |
Focused on higher savings yields and lower loan rates |
Rates vary by company |
| Access |
Fewer branches, shared ATM networks |
More branches, proprietary ATM networks |
| Technology |
Digital banking services |
Extensive digital tools |
| Lending |
Lower interest rates, fewer fees and flexible options |
Larger lending product selection and higher lending limits |
| Service |
Personalized and relationship-based |
Varies, often impersonal |
| Insurance |
NCUA-insured deposits |
FDIC-insured deposits |
Click here to learn more about the credit union difference and what TCU offers its members.
Terms, rates and fees vary by financial institution. Before opening an account, compare the details and features offered by each bank or credit union to help determine which option best suits your needs.
What Are the Benefits of a Credit Union?
A credit union’s key benefits are generated by its member-focused structure. Because credit unions embody a “people helping people” philosophy, they offer lower fees, more competitive loan and deposit rates and a strong community connection. Another important benefit is the emphasis on financial education, helping members build financial confidence and assisting the public, including non-members, whenever possible.
For example, Travis Credit Union offers 24 local branches, a robust digital banking platform that includes a top-rated mobile app, and free access to 30,000 ATMs nationwide through the CO-OP ATM® network. Also, TCU’s Generation Wealth financial education program helps hundreds of teens each year learn about basic personal finances, while the TCU Foundation assists the community with a variety of grants and programs.
Are Credit Unions Better Than Banks?
When considering if credit unions are better than banks, you’ll discover the answer depends on your individual financial preferences. Factors such as convenience, fees, products, banking and loan options all play their part in the answer. Credit unions will appeal more to those who prefer banking that’s more local, community-focused and provides lower fees and higher savings rates. Big banks may attract those who are seeking a larger branch network for more convenience.
Are Credit Unions As Safe as Banks?
Keeping your money safe and secure is a major consideration when choosing a place to bank. About 90 percent of credit unions in the U.S. are federally insured by the National Credit Union Administration (NCUA). This means that deposit accounts are each insured up to $250,000 by the U.S. government. The other 10 percent of credit unions are privately insured.
Banks are federally insured by the FDIC, with similar coverage as credit unions. When choosing a financial institution, be sure to check if they are federally insured. You can visit the NCUA share insurance coverage page to better under the coverage provided.
Credit Union or Bank: Which Should You Choose?
As previously mentioned, deciding between a credit union and a bank will depend on your needs and preferences. Consider factors such as fees, rates, account access, membership eligibility, technology and community involvement. Also, compare the actual types of accounts you’re interested in to see which offers better features and benefits. For a more in-depth look at banks versus credit unions, check out the free course Banks vs Credit Unions: Does It Matter on the TCU Knowledge Base.
How Can Travis Credit Union Help?
As a member-owned financial partner serving Northern California, Travis Credit Union offers a variety of checking and savings accounts, free financial education resources through our Knowledge Base platform, 24 convenient branch locations and free access to a national ATM network. Also, TCU’s digital banking services help you manage your finances on the go. Learn more about us at traviscu.org.
FAQ: Credit Unions vs. Banks
What is the main difference between a credit union and a bank?
Banks are for-profit institutions owned by shareholders, while credit unions are nonprofit cooperatives owned by members. This key difference shapes how each organization operates and serves its customers.
How do fees and interest rates compare between credit unions and banks?
Credit unions often offer lower fees and better loan and savings rates because profits are reinvested into members. Banks may have higher fees and rates can vary widely depending on the institution.
What services do credit unions and banks typically provide?
Both offer checking and savings accounts, loans and credit cards. However, banks may offer a broader range of products while credit unions focus on member-oriented benefits.
Are credit unions as safe as banks?
Yes, most credit unions are federally insured by the NCUA and banks are insured by the FDIC. Both provide similar protection for deposits up to $250,000.
How does access differ between credit unions and banks?
Banks generally have more branches and bigger ATM networks. Credit unions may have fewer branches but often provide similar ATM access through shared networks.
Who can join a credit union?
Membership is usually based on specific criteria, such as employer, location or affiliation.
Which is better for your money: a credit union or a bank?
The choice depends on your financial needs and preferences. Credit unions may suit those seeking lower fees and community focus while banks may appeal to those valuing convenience and broader services.