Banks vs. Credit Unions: Which is Better? Differences, Pros & Cons

By Myles Leva


Last Updated: May 1, 2023


Banks and credit unions are the go-to money holders and traditional lenders.

If you want transparency and good rates to take maximum advantage of good credit, they are both good options for loans and other credit.

But knowing the differences between them helps you make better decisions to get the most out of your banking and lending experiences.

Banks and credit unions both offer the full range of financial services, with few major differences.

Either can provide:

checking or savings accounts

  • loans
  • credit cards
  • lines of credit
  • financial advice

In this article, we will provide a straightforward comparison between credit unions and banks.



Is it better to keep my money in a credit union or in a bank?

Banks are for-profit companies that are owned by shareholders and make a profit through their financial products and services.

They are thus professional financial institutions that have a vested interest in keeping customers with them, while keeping their shareholders happy.


What are some benefits of using a bank?

The main thing banks offer that credit unions do not is a wider range of financial services.

The area where this is the most obvious is with investments. Banks normally offer a much wider range of investment options including stocks, bonds, and funds like mutual funds and ETFs. They also normally offer comprehensive estate planning and wealth management services.

On a day-to-day basis, where banks really win out is in their convenience. Most banks have many branches and many ATMs available. They are more accessible and are easier to access when you need them.



What are the disadvantages of banking with banks?

The main disadvantage of banking with banks is higher fees and rates.

All products and services cost more. Banking fees add up over time, and the difference in interest rates on loans can be worth thousands of dollars or more.

The other disadvantage to banks vs. credit unions is regarding service. Banks can provide great service, but the nature of credit unions makes them more proactive and thorough in helping members. You aren’t exactly part of a community when you bank with a bank.



Credit Unions

Credit unions are non-profit financial organizations accessible only to their members. They do not have shareholders as they are not-for-profit, and their members are also their only customers.


What advantage is a credit union over a bank? 

This arrangement has some great benefits, some of which you can probably already guess.

They are less focused on profits and more focused on providing quality products and services. The first quality they offer is better rates on products and services, particularly when it comes to lending. The rates you get with credit unions are lower than anywhere else.

The “profits” credit unions produce are returned to customers in the form of better rates.

Credit unions offer many of the same services that banks do. You can open checking and savings accounts.

But one thing they offer that banks do not is power for the customer. As a credit union member, you normally are part of a “one member, one vote” system. As a member, you are something of a customer and a shareholder at the same time. So, they have a democratic system where your concerns are always considered.


What are the disadvantages of banking with credit unions?

The greatest disadvantages of banking with credit unions are the lack of convenience.

Credit unions lack the large networks that banks have. They normally can’t compete on infrastructure, either. Banks have branches, ATMs, mobile banking, apps, and other technology. Most credit unions offer little in terms of online banking.


What are the biggest risks facing credit unions?

While credit unions generally offer superior service and financial product quality, they have a few disadvantages.

The main one is that the lack of sufficient ATMs and locations can be a big problem for you when you really need money. It can be challenging to access funds in any way. But it can also be more difficult to access a credit union representative.

Most credit unions also have very specific membership requirements. Geographic requirements are typical, or the union will be for people in a specific professional or other community. This can make it difficult to join the credit union you want.

Perhaps the biggest risks facing credit unions are their limited products and technology.

Banks are the more popular option both because they are far more accessible and they offer a wider range of services. But banks also tend to keep up with technological developments. This has many implications, one of which is that you have more resources for investing with a bank.



Conclusions: Banks vs. Credit Unions

Banks and credit unions offer similar products and services. The main difference is that the former is a business while the latter is a cooperative.

For most of you reading, having a bank account is the more feasible and popular choice. It’s unlikely that anyone reading doesn’t already have a bank account, while most people aren’t members of a credit union. But there is nothing saying you can’t use both!

Photo by Keller Chewning


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