Banks vs. Credit Unions: How to Decide

Credit unions and banks offer many of the same products but their rates, fees, and lending practices differ. Here's what to consider when deciding between a bank and a credit union.
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Should you choose a credit union over a bank? It depends on the type of financial services you need. To decide between the two types of banking institutions, you should be clear on what makes a credit union different from a bank and the specific factors that can help you weigh the advantages of one over the other.


How is a credit union different from a bank?

Credit unions are owned and governed by their members while banks are for-profit enterprises with public or private shareholders. By not looking to make a profit for shareholders, credit unions may offer more competitive rates or fees than banks.

Historically, credit union membership was somewhat tightly limited, but they have become more widely available over the years. Credit unions now serve over 100 million account holders. Still, they tend to be more locally or regionally based than the largest banks.

Deposit insurance

Both banks and credit unions have deposits insured by a federal government organization, up to $250,000 for each customer of a participating institution. Banks are insured through the Federal Deposit Insurance Corporation (FDIC), and credit unions are insured through the National Credit Union Association (NCUA). You can check whether a particular institution is covered at (for banks) and (for credit unions).

Banks vs. credit unions: Which is right for you?

Once you determine the insurance protection you need for your accounts, choosing between a bank or a credit union then depends largely on what your needs are and the terms offered by the specific institution. Here are some things to consider about different types of products:

1. Savings account rates

According to data compiled by the NCUA from S&P Global Market Intelligence, as of the end of 2017, credit unions on average offered a slight rate advantage over banks on a range of deposit products such as savings accounts and CDs. This advantage was greatest when it came to long-term CDs.

Averages can be deceiving, though, since some banks offer rates several times the national average. With the average rate differences between banks and credit unions being very slight for most products, it's wise to look at specific offerings before making a decision.

2. Checking account fees

When it comes to offering competitive fees, credit unions have a theoretical advantage because of their not-for-profit structure. However, with some banks using online banking to reduce their cost structure, they may be able to overcome this.

Large banks are likely to have a wider geographic footprint of branches and ATMs than most credit unions. This can be a convenience and save you the fees that are added when you use another institution's ATM. However, this may be less relevant if you don't travel much or if your credit union is part of a far-reaching ATM network.

3. Loan rates and requirements

Is it easier to get a loan from a bank or a credit union? Again, it may depend on the type of financial services you need. Credit unions may be more sensitive to the lending needs of their members and, thus, may make it easier to qualify for a loan. What is especially striking, though, is the difference between average loan rates at banks and credit unions.

According to information compiled by the NCUA, as of the end of 2017, average rates on fixed-rate mortgages were fairly similar. However, credit unions had a clear advantage when it came to rates for adjustable-rate mortgages, home equity loans, and unsecured personal loans. This advantage became even more compelling when it came to car loans, with average credit union rates running more than 1.8 percent cheaper than bank loan rates.

While it is entirely possible a bank may offer the most competitive loan terms and qualification standards, these numbers suggest you should definitely consider credit unions when looking for a loan.

Comparing banks vs. credit unions

For consumers, choice is power, and having both banks and credit unions to choose from gives you additional options. While some generalizations can be made about banks and credit unions, differences between specific institutions are likely to outweigh those generalizations. This means you would be wise to consider both banks and credit unions in your search.

FeatureBanksCredit UnionsRecommendation
OrganizationFor-profitNot-for-profitCredit union membership may offer more personal customer service
Deposit InsuranceFDIC - up to $250,000NCUA - up to $250,000Understand your situation
RatesSome banks offer rates higher than the national average on savings/CD productsOn average, credit unions offer higher rates than banks on savings/CD products -- especially long-term CDsDo comparison shopping on specific products - Read America's Best Rates
FeesOnline banks may be able to match fee structureGenerally, credit union fee structure is lowerDo comparison shopping on specific products - Read the latest Checking Account Fee Survey
ATMsMay have larger ATM networks than most credit unions Look for large ATM  networks to reduce fees
Loan RequirementsLending requirements may be tightMay be easier to qualify for loansIt is possible that banks offer competitive terms and standards, but definitely consider credit unions for loans
Loan RatesRates on fixed-rate mortgages are similarRates for adjustable-rate mortgages, home-equity loans, and unsecured personal loans may be betterIt is possible that banks offer competitive terms and standards, but definitely consider credit unions for loans
Car Loans Average car loan rates 1.8% cheaper than banksIt is possible that banks offer competitive terms and standards, but definitely consider credit unions for loans

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