Credit Unions vs Banks: 7 Key Differences to Help You Choose in 2025

When it comes to managing your money, choosing where to keep it is one of the most important decisions you'll make. Two popular options are credit unions and traditional banks—but which one is right for your financial needs? This guide breaks down the key differences to help you decide.

What's the Difference Between Credit Unions and Banks?

At their core, both credit unions and banks offer similar services: checking accounts, savings accounts, loans, and credit cards. However, the way they operate and who they serve differ significantly.

Banks: For-Profit Financial Institutions

Banks are for-profit businesses owned by shareholders. Their primary goal is to generate profits for these shareholders, which influences how they operate:

• Ownership: Owned by investors and shareholders

• Profit Model: Generate revenue through fees, interest rates, and other financial products

• Accessibility: Open to anyone who meets their requirements

• Decision Making: Corporate executives make decisions based on profitability

Credit Unions: Not-For-Profit Financial Cooperatives

Credit unions operate as not-for-profit financial cooperatives owned by their members:

• Ownership: Owned by members (that's you when you join!)

• Profit Model: Return profits to members through better rates and lower fees

• Accessibility: Membership usually requires meeting specific criteria (working for certain employers, living in specific areas, etc.)

• Decision Making: Elected board members (who are also members) make decisions based on member benefits

Comparing the Key Features

Interest Rates

Credit Unions:

• Typically offer higher interest rates on savings accounts

• Generally provide lower interest rates on loans

• National average savings rate: 0.21% (about 5x the national bank average)

Banks:

• Usually offer lower interest rates on deposit accounts

• Often charge higher interest rates on loans

• National average savings rate: approximately 0.04%

Fees

Credit Unions:

• Lower monthly maintenance fees

• Lower overdraft fees (average: $28)

• Fewer account requirements to waive fees

• Often no minimum balance requirements

Banks:

• Higher monthly maintenance fees

• Higher overdraft fees (average: $35)

• More complex requirements to waive fees

• Often require minimum balances

Technology and Accessibility

Banks:

• More ATMs nationwide

• Better mobile apps and online banking platforms

• More branches in different states

• 24/7 customer service

Credit Unions:

• Fewer proprietary ATMs, but many participate in shared ATM networks

• Improving digital services, but may lag behind major banks

• Typically have fewer branches, often concentrated in specific regions

• Limited service hours

Customer Service

Credit Unions:

• Personalized customer service

• Higher customer satisfaction ratings

• More flexibility with lending decisions

• Members often report feeling valued

Banks:

• More standardized customer service

• Lower customer satisfaction ratings overall

• Stricter lending criteria

• Less flexibility for customers with unique situations

Who Should Choose a Credit Union?

Credit unions might be better if you:

• Value personal relationships with your financial institution

• Want to pay fewer and lower fees

• Prefer higher interest rates on savings

• Need lower interest rates on loans

• Qualify for membership in a credit union with convenient locations

• Don't need extensive online banking features

• Prefer a community-focused approach

Who Should Choose a Bank?

Banks might be better if you:

• Travel frequently and need nationwide access

• Prioritize advanced mobile and online banking features

• Need specialized financial products and services

• Want 24/7 customer service access

• Can maintain minimum balances to avoid fees

• Need access to numerous physical branches

• Value name recognition and established reputation

The Hybrid Approach: Why Not Both?

Many financial experts recommend a hybrid approach—maintaining accounts at both a credit union and a bank to maximize benefits:

• Credit Union: For savings accounts, auto loans, and mortgages to benefit from better rates

• Bank: For checking accounts and digital banking services when convenience and technology are priorities

Safety and Security: Both Are Equally Protected

When it comes to security, both options provide strong protections:

• Banks: Insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per depositor

• Credit Unions: Insured by the National Credit Union Administration (NCUA) up to $250,000 per depositor

How to Choose What's Right for You

1. Assess your priorities: Convenience? Lower fees? Better rates? Personal service?

2. Check eligibility: Can you join a credit union based on where you live, work, or worship?

3. Compare specific offerings: Look at the actual accounts, rates, and fees at institutions you're considering

4. Consider your banking habits: Do you need in-person service or prefer digital banking?

5. Look beyond the big names: Local banks and credit unions often offer competitive products

Bottom Line

There's no one-size-fits-all answer to whether banks or credit unions are better. The right choice depends on your specific financial needs, preferences, and goals.

Credit unions typically offer better rates and more personalized service but may lack the technological convenience of bigger banks. Traditional banks provide better accessibility and more advanced features but often charge higher fees and offer less favorable rates.

For many people, the ideal solution might be using both—enjoying the best features each has to offer while minimizing the drawbacks of either option.

Remember: The best financial institution is the one that helps you meet your specific financial goals while charging you the least to do so.