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Credit Unions vs. Banks: How to Decide

Nov. 26, 2018
Banking, Banks & Credit Unions
At NerdWallet, we strive to help you make financial decisions with confidence. To do this, many or all of the products featured here are from our partners. However, this doesn’t influence our evaluations. Our opinions are our own.

If you’re choosing between credit unions and banks, look at key differences like profit models, interest rates and branch access to figure out which aspects are most important to you.

Why choose a credit union?

  • Typically has higher interest rates on deposits.
  • Emphasis on customer service.

Why choose a bank?

  • More branches in the region or across the country.
  • Typically quicker to roll out new apps and other tech.

What to ask

» Ready to decide right now? Here are our picks for the best national banks and best credit unions.

Top Overall Banks

Ally Bank

NerdWallet has rated this bank:
    • Over 43,000 ATMs, strong customer service
    • 1.90% savings APY
Discover

at Discover,

Member, FDIC

Discover Bank

NerdWallet has rated this bank:
  • Over 60,000 free ATMs, cash-back rewards
  • 2.00% savings APY
Chase

at Chase,

Member, FDIC

Chase Bank

NerdWallet has rated this bank:
  • Large ATM and branch networks, great sign-up bonus
  • 0.01% savings APY (effective 6/14/19; rates are variable and subject to change)

Top Overall Credit Unions

Alliant Credit Union

at Alliant Credit Union,

Federally insured by the NCUA

Alliant Credit Union

NerdWallet has rated this credit union:
  • Over 80,000 free ATMs, interest checking available
  • 0.65% checking APY

Connexus Credit Union

NerdWallet has rated this credit union:
  • High 1.75% APY on checking balances up to $25,000
  • Reimburses up to $25 in ATM fees a month
  • Eligible to apply with a $5 charitable donation

First Tech Federal Credit Union

NerdWallet has rated this credit union:
  • More than 5,000 shared branches
  • Competitive interest on checking account
  • Eligible to apply with $8 charitable donation

The difference and why it matters

At bottom, banks are for-profit enterprises, while credit unions are nonprofits. Credit unions in principle exist to serve a community of people tied by a “bond of association,” which may be based on location, employer, faith, membership in another organization, or other factors.

Credit unions offer small dividends, discounted loan rates and other benefits to their members.


To serve its community, a credit union provides financial products on the most favorable terms it can afford to offer. This means that instead of offering accounts to customers and large dividends to a small group of owners, as banks do, credit unions offer small dividends — and discounted loan rates and other benefits — to a large group of members.

Choosing between a bank and a credit union involves some tradeoffs. Credit unions generally provide better customer service than banks do, though the ratings for smaller banks are nearly as good. Credit unions also offer higher interest rates on deposits and lower rates on loans. Banks often adopt new technology and tools more quickly. Broad ATM and branch networks are the norm for big banks; credit unions keep up with large, cooperative networks of ATMs and shared branches.

» Compare CD rates between banks and credit unions: best bank CD rates and best credit union CD rates

Summary

AspectsBanksCredit unions
StructureFor-profitNot-for-profit
RatesUsually lower interest ratesUsually higher interest rates
Deposit insuranceFDIC insures up to $250,000 per accountNCUA insures up to $250,000 per account
Customer servicePersonal interactions less of a priorityLocal and personal engagement emphasized
Physical locationsNational banks have many more branches; regional ones, not quite as many Fewer branches than banks, but may share branches via a network
Technology Often quicker to roll out new apps and other techGenerally lag in new technology

Making your choice

  • Identify what matters to you most and make a prioritized list of what you’re looking for
  • Find your top contenders; you may want to look at NerdWallet’s recommended credit unions and national banks
  • Narrow the list based on your top criteria. Other aspects to consider: Do some on your list perform better in ways you might value in the future (such as having a great digital experience or extensive ATM access)? Do any negatives (higher fees, too few branches) change your mind about which to choose?

Devan Goldstein is a content strategist at NerdWallet, a personal finance website. Email: dgoldstein@nerdwallet.com. Twitter: @devangoldstein.