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Choosing where to keep your money isn’t just about convenience — it can impact how much you earn in interest, what you pay in fees, and even how you’re treated as a customer. Banks and credit unions may offer similar products and services, but they operate on very different models. Understanding those differences can help you decide which option better fits your financial goals.
Read on to learn the difference between credit unions vs. banks, and which one is best for you.
A credit union is a not-for-profit financial institution that’s owned by its members, not shareholders. When you open an account at a credit union, you become a part-owner. As of March 2025, there were 4,411 credit unions in the U.S., according to the NCUA.
Credit unions provide a variety of financial products and services, including deposit accounts and loans. Any profits the credit union makes are typically returned to members in the following ways:
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Higher interest rates on deposit accounts (such as savings accounts, money market accounts, and CDs), helping your money grow faster
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Lower interest rates on loans (such as car loans, personal loans, and mortgages), helping you pay less when financing big purchases or consolidating debt
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Lower fees and improved services
Every credit union has a field of membership, which outlines the specific group(s) of people it’s allowed to serve.
Depending on the credit union, membership eligibility may be based on employer, location, or nonprofit affiliations. For example, some credit unions are only for military service members and their families or only for those belonging to a labor union or museum society. However, there are several credit unions that just about anyone can join.
See our picks for the 10 best credit unions>>
A bank is a for-profit financial institution that accepts deposits, lends money, and provides everyday financial services to individuals and businesses. Banks are owned by shareholders (or a parent company) and operate to earn a profit.
As of March 31, 2025, there were 4,462 banks in total in the U.S., according to the FDIC.
When you think of a bank, you likely think of the big banks with national names — JP Morgan Chase, Bank of America, Wells Fargo, Citibank, and U.S. Bank are the five largest banks in the country based on their consolidated assets. But there are also smaller options, such as community banks that serve particular regions or communities.
See our picks for the best national and super regional banks>>
One of the biggest differences between credit unions and banks is who owns them.
Banks are for-profit institutions owned by shareholders or parent companies. Their primary goal is to generate profits for those owners.
Credit unions, by contrast, are not-for-profit, member-owned institutions. When you open an account at a credit union, you become a member and a partial owner. Each member typically has one vote in major decisions, regardless of how much money they have on deposit.
Because banks are for-profit, they often rely on fees and interest margins to drive revenue. This can mean higher account fees, stricter minimum balance requirements, or less competitive interest rates on savings accounts.
Read more: How do banks make money?
Credit unions also generate revenue, but they don’t aim to maximize profits. Any surplus earnings are generally reinvested into the institution or returned to members through lower fees, better loan rates, and higher savings yields.
Bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC), which guarantees up to $250,000 of coverage (per institution, per account holder, per ownership category) if the bank fails.
The FDIC doesn’t insure credit unions, but that doesn’t mean your money is at risk. Credit unions are regulated by the National Credit Union Administration (NCUA) and are protected by the NCUA’s National Credit Union Share Insurance Fund (NCUSIF). As with FDIC insurance, credit union deposits of up to $250,000 are insured through the NCUSIF.
Notably, no member of a federally insured credit union has lost money from an NCUSIF-insured account due to a credit union failure.
Banks are open to anyone who meets basic account requirements. Credit unions, however, have membership eligibility rules, often based on where you live, work, go to school, or whether you belong to a specific organization. Some also allow membership through family or household connections.
That said, eligibility is often broader than people expect, and many credit unions serve entire regions or states.
Credit unions are a great choice if your main goals are saving money and receiving personalized service.
Because of their not-for-profit structure, credit unions often offer higher savings rates and lower interest on loans, plus lower fees in general. In fact, according to CUNA, the benefits of credit unions are the equivalent of $149 per person and $313 per member household. Not to mention, many credit unions emphasize relationship banking and community involvement, which could result in a more meaningful banking experience.
There are some tradeoffs, however. Many credit unions serve a smaller geographic footprint, and they have specific requirements to join. You might find that banking with a credit union is too limiting. That said, many credit unions belong to shared branch and ATM networks, so you can still access your money and perform basic banking tasks when you’re out of town.
A bank may be the better choice if your top priorities are convenience, advanced banking tools, or a nationwide presence.
With their larger budgets, banks can offer additional programs and take on more risk. For example, banks may offer mortgages with no down payment requirement and no private mortgage insurance, or may offer down payment assistance. They’re also often able to institute more customer-focused technology, such as mobile apps, completely digital loan applications, and other services.
Banks are also more likely to offer investing, wealth management, business banking, and credit products under one roof. Plus, larger regional and national banks have more branch and ATM locations, which is particularly helpful if you travel or move often.
The downside? Banks may charge higher fees and pay little to no interest on savings, especially at large national institutions.
Both credit unions and banks provide safety and security for your money. Which is the right choice for you depends on your individual needs and preferences. Taking the time to shop around and compare different accounts and services can help you find the best deal.