Banking •

November 9, 2022

Bank vs. credit union: which one is the best choice for you?

Banks and credit unions offer similar services. Banks are privately owned, while credit unions are owned by their members. Here are the key differences.

Bank options

For most of us, our bank account is the backbone of our day-to-day finances. It’s where we receive paychecks, manage money, withdraw cash, pay bills, and more. 

Where we have our primary bank account is important because it dictates the fees we’ll pay, the types of services we’ll have access to, and the level of customer service we’ll enjoy. 

There are 2 broad options when it comes to banking: traditional banks and credit unions. But what is the difference between a bank and a credit union—and which one is right for you? 

What is a bank? 

A bank is a for-profit financial institution that offers various financial services. At a bank, you can open a checking or savings account, take out a loan, and much more.

What Is a Bank?

Banks can be large or small. Some banks have thousands of branches, while others only have a few. The defining characteristic of a bank is that it is a licensed financial institution that is run as a business

Let’s break that statement down into its 2 parts. 

A licensed financial institution means that the bank is legally permitted to operate as a bank. This is a strictly regulated industry, and these regulations ensure that your money is kept safe. Banks also have insurance through the Federal Deposit Insurance Commission (FDIC). FDIC insurance covers deposits for up to $250,000 per account holder. So even if the bank goes out of business, burns down, or is robbed, your money will be safe. 

A bank that’s run as a business means that it is set up to make a profit. Banks are primarily in the business of loaning money. When you deposit money at a bank, the bank turns around and lends that money to someone else in the form of a mortgage, credit card, or personal loan. Banks also charge fees that help them generate revenue. 

Why choose a bank? 

Banks offer several benefits for consumers, including:

Large branch networks: Many banks have dozens or even hundreds of branches throughout the US. This makes it easy to bank in person, even if you’re traveling.

Large ATM networks: Banks are often members of ATM networks, which allow for fee-free access to thousands or even tens of thousands of ATMs. This allows bank customers to use ATMs anywhere in the country without paying fees. 

Wide variety of financial services: Banks tend to offer a wide variety of services ranging from deposit accounts to loans to insurance and investments. 

What is a credit union? 

The services a credit union offers are similar to those of banks. However, credit unions are nonprofit organizations, which means that they aren’t set up to turn a profit. Instead, they exist to serve their members. 

What Is a Credit Union?

Like banks, credit unions are licensed and highly regulated. They offer many of the same products and services, and deposit accounts are insured for up to $250,000 per account holder. Credit unions’ insurance is provided by the NCUA instead of the FDIC, but the details are similar otherwise. 

The key difference is that credit unions don’t run like a business—they run like a cooperative. Their purpose is to serve their members rather than profit from their customers.

Credit unions still charge interest and may also have fees. But generally speaking, a credit union’s fees and interest rates are lower than a bank’s. 

Any profit that a credit union generates is returned to the credit union’s members. This could be in the form of dividends/interest or lower interest rates on loans. 

To join a credit union, you must become a member. The requirements vary depending on the credit union. Some credit unions require that you reside in a certain state or area or that you work for a certain type of employer. These days, many credit unions are open to a wide variety of members, but again, the details vary! 

Why choose a credit union?

Credit unions offer the following benefits to consider:

The same services as a bank, only cheaper: Generally speaking, credit unions offer a similar set of products and services as banks. The difference is that they are usually cheaper—meaning lower interest rates and lower fees. 

More interest on your savings: Most savings accounts pay interest, but the rates they pay vary significantly. Credit unions generally offer better interest rates on savings accounts, certificates of deposit, and other deposit accounts. 

Community culture: Credit unions often focus on improving their communities, whether that’s the city, county, state, or just the community of the credit union itself. Many credit unions sponsor local events, contribute to other nonprofits, and give back to the community in other ways. 

Similarities between banks and credit unions

Banks and credit unions are essentially in the same business. They loan money and offer deposit accounts where you can store your funds. 

Banks and Credit Unions

You also don’t need to worry about losing your money or getting scammed with either banks or credit unions, as both are highly regulated and insured against losses. 

Banks and credit unions both offer the following services:

  • Checking accounts and debit cards

  • Savings accounts

  • Certificates of deposit

  • Credit cards

  • Mortgages

  • Personal loans

  • Business loans

  • Auto loans 

  • Lines of credit

  • Other loans

All your basic banking needs can be handled by either a bank or a credit union. Both tend to have physical branches and online banking solutions—although you can also find online-only banks and credit unions. 

When you get into more specialty products, like retirement accounts, banks sometimes offer more. Banks are often larger than credit unions and may be more equipped to handle a wider variety of services. But for most people, there isn’t much difference between a bank vs. a credit union when it comes to the services they offer. 

Bank vs. credit union 

Trying to decide on a bank vs. a credit union? In this section, we’ll break down the major differences between the two. 

Bank vs

Let’s break down each characteristic that separates banks and credit unions. 

Ownership structure

Ownership structure refers to who owns the organization and the organization’s purpose. 

Banks are privately owned for-profit businesses. They are owned by shareholders (investors). Some banks, like family businesses, are privately owned. Others are publicly traded, which means that anyone can buy shares of the bank on the stock market. Banks exist to make a profit and run like any other business. 

Credit unions are member-owned, nonprofit organizations. They are owned by their members. Credit unions are not set up to make a profit. Instead, they exist to serve their members. They still charge interest and fees, but their “profit” goes back into serving their members with lower rates or better yields on savings accounts. 

Available services 

Banks and credit unions offer similar services. However, banks may offer a wider variety of services in some cases.

Both banks and credit unions cover all the basics. This includes deposit accounts, like checking and savings accounts, as well as loans, like auto loans, business loans, mortgages, and credit cards. 

Big banks tend to offer a wider variety of services in investment accounts and advisory services.

For instance, they may offer brokerage accounts for trading stocks, retirement accounts such as IRAs, and more. 

Banks may also offer financial advisory services, whereas credit unions generally do not. 

Of course, there are exceptions to these generalizations. For instance, some credit unions offer investment and advisory services, and some banks don’t. 


Both banks and credit unions charge fees. These may include monthly service fees, overdraft fees, late payment fees, or loan origination fees. 

Generally speaking, fees are higher at banks than at credit unions. This is particularly true for monthly service fees, which many credit unions don’t have at all. In 2021, the average bank monthly service fee was $8.34 per month, while the average credit union fee was $2 per month. 

Remember, banks are designed to make a profit, so they often charge higher fees to generate more revenue. Credit unions have fees, too, but their motive is not to make a profit—so their fees are generally lower. 

Interest rates

Interest rates can be divided into 2 categories: the rates charged on loans and the rates earned on savings accounts. 

Interest Rates at Credit Unions

In both categories, credit unions tend to come out ahead. Loan interest rates at credit unions are typically lower than they are at banks, and interest paid on savings is generally higher at credit unions than banks. 

This isn’t always the case, however. For instance, some specialty online banks may have generous, high-yield savings accounts that may pay better than credit union accounts. 

And for well-qualified borrowers, online banks’ interest rates on large loans like mortgages can also be very competitive. As always, it pays to shop around to find the best deals! 

Branch and ATM access 

Most banking activities can be handled digitally, but there are always situations where you’d prefer a physical bank branch or ATM. Most banks and credit unions have physical branches, but the availability of locations and ATMs can vary significantly. 

Big banks tend to have hundreds, if not thousands, of bank branches. Chase, for instance, has more than 4,700 physical locations and more than 16,000 ATMs

Credit unions are generally smaller and often locally focused. They may have many locations in a certain region or state but none anywhere else in the country. 

As for ATMs, keep in mind that you can use any ATM with your debit card—but you may be required to pay a fee of $2–$4. If you use your own bank’s ATM, there generally won’t be a fee. In this category, banks tend to win out, as they often have larger ATM networks than credit unions. 

Fortunately, many credit unions and banks participate in partner networks of ATMs. For example, many credit unions are partnered to allow their members fee-free access to all ATMs in the network. So, as a member of one credit union, you might be able to use another credit union’s ATMs without paying a fee. 


Most of us conduct the majority of our banking online or through our phones. So having a bank with up-to-date technology is important! 

In this category, big banks tend to win out. They usually have more money to invest in technology, so their online banking and mobile banking platforms tend to be top-notch.

The quality of technology at credit unions varies. Some credit unions are just as competitive as big banks, while others are far behind. If you’re considering a credit union, search for their app and check its user reviews. 

How to choose between a credit union and a bank 

Ultimately, the bank vs. credit union decision depends on a variety of factors. So, how do you choose? 

How to Choose a Bank

Well, which one you should choose depends on how you answer a number of important questions, including:

What’s available to you? 

What credit unions are in your area, and what are their membership requirements? What banks are in your area? You can consider general credit union vs. bank factors, but it’s a little pointless if the solution isn’t available to you!

What’s most important to you? 

What factors are the most important for your banking needs? Do you want low fees and low interest rates on loans? If so, then a credit union might be for you. Do you want a big network of banks and ATMs? A big bank might be best in that case. Consider all the factors we discussed above and then think about which aspects are the most important ones to you. 

Do you qualify for any specialty banking products? 

Some banks and credit unions are only open to certain types of members. Often, these options have significant benefits if you qualify. For instance, if you’re a veteran, you might qualify for membership at a specialty bank or credit union. Or, if you’re a student, you might consider using an app like Mos, which is specifically designed for high school and college students. 

What services do you need?

If you just need basic banking services (deposit accounts, loans, etc.), then a bank or a credit union will work. If you need specialized financial advisory services, investment accounts, etc., then a bank might be a better fit. If you only need primary banking services or you’re looking to save money on fees and interest, a credit union might be a wise choice. 

Bottom line

Banks and credit unions offer similar services, but they have key differences. In general, credit unions have lower fees and better interest rates simply because they are nonprofit institutions.

Banks also offer some perks. They typically have more branches and more ATMs, and they may offer a wider selection of services and products. Ultimately, you’ll need to weigh what’s most important to you when deciding between a bank vs. a credit union.

If you’re a student, there’s a third option: Mos! Mos is banking designed specifically for college students. It offers a zero-fee debit card, help with navigating scholarships and financial aid, access to exclusive side hustles, cash back rewards, and much more. Learn more here to see why 400,000 college students trust Mos for their banking needs.

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