Are Credit Unions Better Than Banks?

Where do you keep your money? It’s considered good financial sense to bank with some sort of financial institution. Many people decide to create and maintain an account at a bank or credit union, for some of the following reasons:


Imagine storing all your cash at home, under your mattress or in a locked safe. It may feel secure, but what happens if someone breaks into your home or if there’s a fire that destroys everything?

Plus, credit unions and banks are typically insured by the NCUA or FDIC, meaning that if your financial institution were to close and not be able to provide you with the funds in your account, the NCUA or FDIC would be able to do so.

are credit unions better than banks
Image credit: pexels


While cash is preferable in certain situations, in this day and age, it’s quite easy to access funds that you keep in a bank account. You can use an ATM, found almost everywhere, and use it to withdraw money 24/7. Paychecks can also be deposited into bank accounts directly, making the funds available sooner than if one deposits a check in-person.


Banks and credit unions are significantly cheaper to use than check-cashing places that will charge you a high fee.

Financial Future

A bank or credit union is also a great place to apply for a loan, and if you already have an established relationship at such an institution, it’s easy and convenient to manage all of your financial matters in one place.

All of the reasons above are great examples as to why individuals and families decide to open and maintain financial accounts at banks or credit unions. Both types of institutions offer many of the same services, such as checking and savings accounts, home and auto loans, credit cards, and money market accounts.

There are, however, significant differences between banks and credit unions. This then raises another question—how do you choose the best institution for you? Are credit unions better than banks? We’ll explore some of the differences here to help you decide.


You may notice that all credit unions will refer to their “members” on their websites and in advertisements. What does that mean?

Anyone who uses the services provided by a credit union is technically a member. Membership may come with requirements based on the community that you live in, where you work, or through other associations that you’re involved with. For example, Rivermark Community Credit Union membership is available to anyone who lives or works in one of 11 counties in Oregon. Other instances include credit unions specific to those in the military or members of the armed forces or a credit union for educators within a certain school district.

In contrast, banks aren’t owned by members but rather by paid shareholders and investors. Banks don’t have a membership requirement the way credit unions do and are available to most consumers who don’t have a history of banking issues or problems. Accessibility-wise, not being a community- and member-focused usually means that there are more branches and ATMs available with a bank than with a credit union, especially those banks with a national presence. However, this could also mean the service you receive is less personal.


One key difference between all banks and all credit unions is the business structure and organization of these institutions. Banks are considered for-profit financial institutions and focus on commercial loans and other services that will earn the highest return. Banks will lend their customers’ funds to businesses and individuals and receive interest payments in return. When customers deposit their money, banks also pay interest on these funds. Governing and decision-making is done by paid shareholders

Credit unions are not-for-profits and take the focus away from shareholders and the like, focusing instead on member support and offering important financial services needed by their members, such as savings accounts and consumer loans. Yes, credit unions do make money just the same as banks, but the main difference is that all credit unions share those profits with their members in numerous ways. Furthermore, decision-making is done by owners and members in the local community who form a democratically elected board.

Who Benefits?

As mentioned above, banks are for-profit institutions; they have to pay taxes on the profits they earn, and many are also publicly traded companies. Credit unions are not-for-profits and typically exempt from federal taxes.

Since banks have the ultimate goal of making a profit, despite having to pay taxes, they generally charge higher fees when compared to credit unions and don’t provide their customers with loan and credit card interest rates that are as low. Reading the fine print is especially important when banking with a bank, as there may be plenty of fees that can add up if you overdraw from your account or fail to make a minimum deposit within a certain amount of time.

Credit unions, meanwhile, have a different goal: to serve their members and their community. For this reason, credit unions aren’t focused on making a profit the same way that banks are, and this is reflected in many ways. One of those ways is fewer fees—you might notice that your local credit union offers checking accounts without a minimum balance or a monthly charge. Checks, electronic transactions, and withdrawals are also often free of charge, which could end up saving quite a bit of money annually.

Credit unions are also invested in returning the profits that they do make to their members. This is reflected through lower interest rates on loans, fewer and lower fees overall, and paying higher rates on money market or savings accounts. With surplus income, a credit union may also pay dividends to members.

Customer Service

Finally, as we mentioned above, one of the main differences is how much the satisfaction of customers and members matters. A bank might make it easier for customers to sign up for an account since there’s no membership requirement. It may also be easy and convenient to do so through a bank’s website and to conduct your banking online or through an app. However, you’ll likely find there’s less flexibility and customer focus than with credit unions, which are known for supporting and focusing on member satisfaction. Your teller may even know your name since credit unions are more local and community-based.

In the end, the decision is yours, but if you’re looking for a financial institution that truly takes care of its members, credit unions are your best bet.

Jasper is a professional business and startup blogger that writes for a variety of leading sites. He loves content partnerships with advertisement agencies.