How are online banks different from credit unions?

Brick-and-mortar banks offer worse rates than credit unions, but the big ones have many physical branches you can walk into. They make in-person banking doable and have some of the biggest ATM networks out there. They may offer nonessential banking products like credit cards -- you may be able to manage all your monetary needs at one traditional bank.

How are brick-and-mortar banks different from credit unions?

Generally speaking, online banks offer the best rates on deposit accounts -- they're cheaper to operate, and banks pass savings onto customers. If you're technologically savvy and top-tier interest rates are your priority, online banks are your bread and butter.

Credit Unions vs. Banks: How to Choose Which is Right For You

When choosing where to keep your money, the decision often comes down to credit unions vs. banks. While both offer essential financial services, they differ in key areas like fees, customer service, and product offerings.

Understanding the pros and cons of each can help you determine which option best suits your financial needs and lifestyle.

At a glance: Credit union vs. banks

Credit unions compete with banks for customers, but there is more than meets the eye. Online banks now offer rates competitive with credit unions, and they offer different perks than legacy brick-and-mortar institutions. Here's an overview of how credit unions, brick-and-mortar banks, and online banks compare.

	Credit Unions	Brick-and-Mortar Banks	Online Banks
Primary Goal	Service members	Make profit	Make profit
Interest rates	Usually better	Typically lower	Often the best
Fees	Lower fees	Higher fees	Lowest fees
Services	Basic	Wide range	Usually limited
Customer Service	Personalized	Varies	Mainly online/phone
Branch Availability	Limited	Extensive	None
ATM Network	Limited but often in networks	Extensive	Usually reimburse fees
Tech Features	Basic	Good	Excellent
Regulation & Insurance	NCUA, similar to FDIC	FDIC	FDIC

Credit unions

A credit union is similar to a bank in many ways, but credit unions are nonprofit institutions. Because they're nonprofit, credit unions can usually offer market-beating rates on savings and checking accounts, mortgages, loans, and sometimes even credit cards.

Advantages of credit unions

Lower fees and interest rates: Credit unions often offer lower fees and interest rates on loans and credit cards compared to traditional banks.
Personalized customer service: They are member-owned, leading to a more community-focused and personalized approach to customer service.
Higher savings rates: Members may benefit from higher interest rates on savings accounts and other deposit products.

Disadvantages of credit unions

Limited accessibility: They typically have fewer branches and ATMs, which may limit convenient access to banking services.
Fewer technological features: Some credit unions may offer less advanced digital banking options compared to larger banks.
Membership requirements: Joining may require meeting specific eligibility criteria, such as living in a certain area or being part of an organization.

Banks

A bank is an institution where you can deposit savings and take out loans. Banks are often seen as a convenient and secure way to store money, and some account types also earn interest. Most banks have both online and in-person services.

Banks are for-profit organizations. At a bank, you can open checking and savings accounts, loans, credit cards, or other products. Almost anyone can join a bank.

Advantages of banks

Wide accessibility: Banks usually have extensive branch networks and large ATM access, making banking services more convenient.
Advanced technology: They tend to offer more sophisticated digital platforms, including mobile banking apps and online features.
Variety of financial products: Banks typically offer a broader range of financial services, including investment options, wealth management, and international banking.

Disadvantages of banks

Higher fees: Banks often charge higher fees for services like account maintenance, overdrafts, and wire transfers.
Lower interest rates on savings: They generally offer lower interest rates on savings accounts and CDs compared to credit unions.
Less personalized service: Due to their larger size and profit-driven nature, customer service can be less personal and more rigid.

Compare savings rates

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How do credit unions and banks differ?

The key difference between a credit union vs. bank is that credit unions are nonprofits while banks are for-profit institutions. As a result, credit unions can offer lower loan rates and higher savings rates. However, credit unions tend to be smaller than national banks.

Also, credit unions usually have membership requirements, but these aren't hard to meet. Banks, on the other hand, serve just about anyone. Banks are often less flexible because they must serve diverse customer bases.

How do the financial services compare?

Personal loans

When shopping for a personal loan, there are two key factors that distinguish a credit union vs. bank.

First is the rates. As discussed above, you may be able to score a better rate with a credit union than with a traditional bank. This could save you hundreds or even thousands of dollars over the lifetime of your loan.

Credit unions may also have more lenient eligibility requirements. That means you could secure a personal loan from a credit union even when a bank might turn you away. They're worth considering if you have fair or poor credit.

Many online banks and lending institutions offer personal loan rates competitive with credit unions. But if eligible, you should check the rates offered by your credit union. Review websites might fail to fully consider the perks of credit unions, which tend to be exclusive.

Credit cards

You're more likely to find credit cards with banks than you are with credit unions, but some credit unions do offer them. Credit union credit cards may charge lower interest rates, but otherwise, they're the same as bank credit cards. Requirements for approval are often less stringent, though you must be a member of the credit union.

Mortgages

Choosing a credit union vs. bank for a mortgage involves many of the same considerations as any other type of loan. You may be able to score a better rate and have an easier time getting approved for a mortgage with a credit union than you can with a bank. But you have to be willing to accept more dated online services, which can make managing your account more of a hassle.

Which is better to have in a recession?

History shows that when it comes to a credit union vs. bank in a recession, the credit union is likely to fare a little better. Both can be hit hard by tough economic conditions, but credit unions were statistically less likely to fail during the Great Recession. But no matter which you go with, you shouldn't worry about losing money. Both credit unions and banks have deposit insurance and are generally safe places for your money.

What is right for you: a bank or credit union?

Shop around. Best advice, compare credit unions like you would banks. They're not the same, but you ultimately use them for the same purpose: to meet your banking needs.

When a credit union is a better choice than a bank:

Credit unions typically offer better rates to members than brick-and-mortar banks. They also tailor products to their communities, and customer service is sometimes better. Credit unions may provide better or more loan options to members with fair or poor credit.

When a bank is a better choice than a credit union:

Banks typically offer convenient online access and advanced technology compared to credit unions. Online banks may provide members with rates competitive with credit unions. Brick-and-mortar banks offer the most branches, ATMs, and nonessential banking services.

FAQs

Brick-and-mortar banks offer worse rates than credit unions, but the big ones have many physical branches you can walk into. They make in-person banking doable and have some of the biggest ATM networks out there. They may offer nonessential banking products like credit cards -- you may be able to manage all your monetary needs at one traditional bank.
Generally speaking, online banks offer the best rates on deposit accounts -- they're cheaper to operate, and banks pass savings onto customers. If you're technologically savvy and top-tier interest rates are your priority, online banks are your bread and butter.

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Credit Union vs. Bank: What's the Difference?