Credit Union vs Bank Account: Key Differences and Benefits

If you're in the market for a new account, you have two main options: a credit union and a bank. A key difference between the two is that credit unions are not-for-profit organizations owned by their members, whereas banks are for-profit businesses.

Credit unions are known for offering more personalized service, with a focus on building relationships with their members. They also tend to have lower fees and higher interest rates on savings accounts.

One of the main benefits of credit unions is their commitment to community involvement, with many credit unions donating to local charities and sponsoring community events.

Credit unions tend to have lower interest rates for loans and lower fees. This can save you money in the long run.

Banks often have more branches and ATMs nationwide, making it easier to access your money when you need it. However, many credit unions have shared branches and surcharge-free ATMs through the CO-OP Shared Branch network.

Banks have historically had better technology online and for mobile apps, but credit unions are catching up. Some credit unions even offer mobile apps with similar features to those of banks.

Each bank and credit union will offer different products and terms, so it's essential to compare financial institutions individually. Don't just assume that one is better than the other without doing your research.

Here are some key differences between credit unions and banks:

Keep in mind that these are general trends, and individual credit unions and banks may vary.

Fees and Charges can add up quickly, so it's essential to understand what you're getting into. Credit unions tend to charge lower fees than banks.

The average Share Draft Checking NSF Fee at a credit union is $28.36, compared to $31.24 at a bank. This might not seem like a lot, but it can add up over time.

Credit unions also have lower average Credit Card Late Fee, at $24.56, compared to $34.18 at a bank. This is a significant difference that can save you money if you're prone to late payments.

Mortgage Closing Costs are another area where credit unions come out on top, with an average cost of $1,151, compared to $1,361 at a bank.

Here's a quick comparison of some common fees at credit unions and banks:

National banks lead in customer satisfaction with the highest ratings for both ATM and branch numbers and locations.

The nation's largest bank—Chase—has more than 4,700 branches, giving customers plenty of options for in-person banking.

Credit unions, on the other hand, tend to have fewer branches on average.

To offset this disadvantage, credit unions have formed a CO-OP Shared Branch network with more than 30,000 ATMs and 5,000 shared branches nationwide.

At shared branches, members can perform many in-person tasks, making it easier to bank without a traditional branch nearby.

Online-only banks, however, usually don’t operate any branches, opting instead to offer their products and services solely over the internet.

This can be a major advantage for those who prefer the convenience of online banking, but may be a drawback for those who value in-person service.

Customer service is a crucial aspect to consider when choosing between a credit union and a bank account.

Banks are slightly stronger in customer service overall, but the difference is almost negligible.

Both credit unions and banks post similar scores in courtesy and helpfulness of tellers or other staff.

The speed of in-branch financial transactions is also similar between the two.

Regional and community banks have the highest-ranked customer service scores.

Credit unions and banks are neck and neck when it comes to providing good customer service, making it a hard decision based on this factor alone.

When comparing the product offerings of credit unions and banks, it's clear that banks have a wider range of services available. Large national banks often offer international banking services, which can be a big plus for those who travel or live abroad.

Credit unions, on the other hand, tend to focus more on offering lower interest rates on their credit cards, rather than rewards and perks. This can be a good option for those who want to save money on interest, but may not be as appealing to those who value rewards programs.

Overall, banks seem to have the upper hand when it comes to product offerings, but credit unions can still be a good choice for those who prioritize lower interest rates.

Credit unions often offer higher interest returns on certain products, but lower interest rates on lending products. This is evident in their higher returns on certificates of deposit and money market accounts compared to banks.

On the other hand, banks may offer higher average returns on interest checking and savings accounts. Credit unions, however, tend to offer more competitive interest rates on loans and credit products.

Credit unions can't charge more than 18% interest on consumer loans, with the exception of short-term loans that compete with payday loans, which can have rates as high as 28%. This provides an added layer of protection for consumers.

Here are some specific areas where credit unions offer more competitive interest rates:

In some cases, the rate differences may be slight, but credit unions tend to offer significantly lower rates on average for credit cards and auto loans.

Credit unions often fall short when it comes to offering a wide range of financial services, with customers scoring them lower in this regard.

Banks, on the other hand, tend to score higher for their various financial services, including checking, savings, debit/credit cards, and loans.

Many large national banks offer international banking services, which can be a big plus for those who travel or live abroad.

Some credit unions may offer these services, but it's not as common as you might expect.

National banks dominate the list of best credit cards, with their offerings often focusing on rewards and perks.

Credit union cards, by contrast, tend to focus more on offering lower interest rates rather than exciting rewards or benefits.

So, are credit unions safer than banks? Well, the answer is not a simple yes or no. Deposits in both banks and credit union accounts are federally insured for up to $250,000.

This means that if you have more than $250,000 to deposit, you should consider splitting it between different institutions to stay within the insured limit.

Credit unions offer several advantages over traditional banks. They typically have lower closing costs for home mortgage loans and lower rates for lending, particularly with credit card and auto loan interest rates.

Credit unions also have generally lower fees and higher savings rates for CDs and money market accounts. This can lead to significant savings for members.

Here are some key advantages of credit unions:

However, credit unions are not without their drawbacks. Membership may require meeting certain work, residential, or occupational requirements, and many credit unions have limited branches and services.

Lower fees and competitive rates on deposits are some of the key benefits of credit unions.

Credit unions offer lower closing costs for home mortgage loans and lower rates for lending, particularly with credit card and auto loan interest rates. They also have generally lower fees and higher savings rates for CDs and money market accounts.

Members of credit unions get to vote on policies and decisions made by the financial institution, giving them a sense of ownership and control.

Credit unions typically provide better savings and lending rates, thanks to being not-for-profit organizations owned by their members. Your money is safe if a credit union fails, as they are backed by the U.S. government through NCUA insurance.

Credit unions tend to be local or regional, often serving a specific community and providing more personalized service. This can be a great advantage for those who value a personal connection with their financial institution.

Here are some key advantages of credit unions:

Banks, on the other hand, have more locations and a wider range of services, including advanced technology and FDIC insurance for up to $250,000 per depositor. This can be a great advantage for those who value convenience and security.

Banks also tend to have more digital banking options, including comprehensive mobile banking apps and special savings features. However, their rates may not be as competitive as those offered by credit unions.

Disadvantages of credit unions include limited access to branches and ATMs, as they typically serve a specific community or region. This can make it inconvenient for those who travel frequently or live far from the credit union's location.

Membership requirements can also be a disadvantage, as credit unions often have specific eligibility criteria that don't apply to everyone. For example, you might need to live or work in a certain region to become a member.

Higher rates may be available at online-only banks, which can offer more competitive savings and CD yields. This is according to the National Credit Union Administration's analysis of credit union and bank rates.

Credit unions usually have fewer product options compared to banks, which can limit your choices for loans and other financial products. However, this may not be an issue for those looking for straightforward banking products.

Here are some specific facts about credit unions' limitations:

Overall, while credit unions have their advantages, it's essential to consider their limitations before making a decision.