Banks vs. Credit Unions

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Contributor, Benzinga
Updated: May 25, 2021

If you’re confronted with a choice between a bank or credit union, sometimes the answer is clear, but oftentimes, it’s a little more ambiguous. Both offer financial services such as checking, loan disbursements, and saving accounts, but differences abound. Before you make a decision, it’s important to employ a holistic approach when reviewing your financial needs. That way, you’ll be confident you’ve made the best possible decision for your immediate and long-term goals.

Banks vs. Credit Unions

Banks are for-profit institutions whose main goals are to maximize wealth for their shareholders. Aside from managing credit, cash and other types of financial transactions, as well as backing personal and business loans, banks provide a FDIC-insured haven for individuals’ assets.

A credit union is a non-profit financial institution that exists to serve the needs of its members. Credit unions provide the same financial services that banks offer, including savings and checking accounts, and personal and business loans. In addition, credit unions are typically much smaller than banks, though they collectively handle over $1 trillion in assets. According to the Credit Union National Association (CUNA), more than 100 million Americans currently utilize the 6,900 credit unions in the United States.

Banks Pros and Cons

Read on to find out the pros and cons of opening an account at a bank.


If you’re a tech-dependent person, storing your money in a bank is the way to go. Since banks are for-profit institutions, they’re able to develop the technology to quickly respond to clients’ needs. Many banks have developed apps that allow their customers to quickly access their money, transfer funds and keep track of their spending. Also, many banks have installed online chat boxes in order to virtually assist customers 24/7. You can also quickly open an account online, choose your own login and change your PIN at any time.

If you’re a frequent ATM user, a bank may be more convenient for you, as there are typically multiple major bank branches in most cities. However, if you’re a bank user, it’s best to concentrate on using your bank’s available ATMs. Though independently owned ATM machines come in handy, they also charge a withdrawal fee and on top of that, are not the safest tool for withdrawing money.

Your money is safe. The Federal Deposit Insurance Corporation (FDIC), a branch of the federal government, insures your money for up to $250,000. Most banks are backed by the “full faith and credit” of the U.S. government. However, not all banks are FDIC-insured. It’s important to check before you commit to a specific bank.


Banks tend to charge higher fees. For example, Bank of America charges a $35 nonsufficient funds fee whereas Alliant Credit Union charges $25.

Banks offer lower returns. Traditional banks are known for their lower interest rates on savings and checking accounts compared to credit unions.

Banks sometimes offer poor customer service. Often, a complaint among banking customers is that banks don’t understand customer needs. According to a 2015 Consumer Reports study, Bank of America, Chase, Citibank and Wells Fargo (which collectively hold approximately 40 percent of all U.S. commercial bank assets) land on the bottom fifth of customer satisfaction rankings.

Credit Union Pros and Cons

Read on to find out the pros and cons of opening an account at a credit union.


Credit unions charge lower fees and pay better interest rates on deposits. The non-profit business model of credit unions prevents them from overcharging members.

Customers are the owners and their deposits represent shares of the credit union’s business. Many operational decisions are made by a group of volunteer board members instead of stakeholders.

Credit unions are more personalized. They take a customer-and-member-centered approach, get to know customers and take a thorough look at loan applicants’ ability to repay. They often work with individuals with low credit score or and/or low income.

Your money is safe here, too. Up to $250,000 is backed by The National Credit Union Insurance Fund (NCUSIF). Over the course of the economic downturn, (2008 to 2012, specifically) CUNA observed four times as many banks fail compared to credit unions. In 2012 alone, 51 banks failed and only 21 credit unions went under.


Credit unions are less convenient. Often, quick access to money is limited if you’re a credit union member.

High-end apps often don’t exist. Also, credit union websites aren’t as digitally advanced if you’re a tech-dependent person.

Check out Benzinga’s Best Credit Unions for more information. 

Final Thoughts

Although banks and credit unions each have their positives and negatives, they’re both great ways to store and grow your money. It’s important to shop around and get familiar with what’s in your own backyard: explore all interest rates, perks and tech offerings and understand the nuances between each type of institution.

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