You have a choice of two primary types of financial institutions that offer checking accounts, savings accounts, and other types of savings vehicles: banks and credit unions. Despite these similar offerings, they are not identical.
Here’s a look at how banks and credit unions compare, how each one operates, and what you need to ask to decide which is right for you.
Credit Unions vs. banks: key differences
| Banks | Credit Unions | |
|---|---|---|
Target audience | Consumers interested in brick-and-mortar branches, banking flexibility, and many product options | Consumers looking for various products with low fees and higher interest rates on savings |
Type of institution | Privately owned or publicly traded | Owned by members of the credit union |
Profit structure | A for-profit institution | A nonprofit cooperative (profits are disbursed to members) |
Structure | A customer-based institution | A member-based organization |
Ease of opening account | Easy to qualify, open to most (if not all) | Must meet membership eligibility criteria |
Deposits insured by | FDIC | NCUA |
Banks: pros and cons
Banks are the most common type of financial institution in the United States, with 71,190 bank branches operating across the country in 2022, compared with 21,748 credit union branches. While banks are more commonplace, there are definitely pros and cons for consumers to consider before choosing between them and credit unions.
Pros
- Few eligibility requirements. Very few banks have strict eligibility requirements. In general, as long as you can prove that you’re a qualifying citizen and have a minimum deposit (if required), you can open an account.
- FDIC deposit insurance. Bank deposits are insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per depositor, per bank, per ownership category. This means that if the bank fails, your deposits are safe up to those amounts.
- Many products from which to choose. Depending on the bank brand you choose, you can find pretty much any financial product you need, from checking and savings accounts to certificates of deposit (CDs), money market accounts (MMAs), home and auto loans, investment portfolios, and more.
- More nationwide access. While some banks are strictly local, many brands offer thousands of local branches across the country, along with a robust network of in-network ATMs.
Cons
- Profit-based institutions may mean higher fees. Banks are for-profit entities that are either privately owned or publicly traded. This means that the bank’s primary goal is to earn profits for shareholders and owners, which often come from fees on consumer accounts and penalty charges.
- Less favorable interest rates. Because banks are focused heavily on profits, many—especially the brick-and-mortar ones—offer lower-than-average interest rates on savings and higher rates on loans compared to credit unions (and many online banks).
- Lower customer service ratings. Compared with credit unions, banks tend to have lower ratings for customer service and satisfaction.
Credit Unions: pros and cons
Credit unions are member-owned institutions that offer the same consumer products with a member-based, profit-sharing focus. However, they aren’t open to everyone.
Pros
- Member-based mentality results in better customer service. Credit unions are owned by their members, so members are usually the focus of the institution. This means that credit unions are generally known for providing better customer service than banks.
- Nonprofit structure means better rates and lower fees. Any profits recognized by a credit union are disbursed to its members each year, so there isn’t as much motivation to hike fees or limit interest rates. Instead, credit union members typically enjoy some of the highest savings and CD rates, lower consumer lending rates, and low (or no) fees on products.
- Many products and services from which to choose. Even though credit unions aren’t as commonplace as banks, they still offer a wide variety of products and services for their members. Whether you’re looking for a mortgage loan, auto loan, investment portfolio, or just a standard bank account, you can find a credit union offering what you need.
- NCUA deposit coverage. Instead of FDIC coverage, credit union deposits are insured by the National Credit Union Administration (NCUA) for the same coverage, up to $250,000 per depositor, per credit union, per account ownership category.
Cons
- Limited nationwide access. The downside to choosing a smaller type of institution is that you may not find what you need everywhere. The credit union you choose may not have branches near your home, so if you move or travel you’ll have to manage your account online.
- Membership eligibility required. While the requirements vary by institution, members are expected to apply and qualify before being accepted into a credit union. Your membership may be based on certain affiliations, your job, your location, even your alma mater.
- May not have cutting-edge technology or features. Because banks focus on making profits for their shareholders,, they tend to roll out new tech features at a faster pace than credit unions. While there are credit unions with high-tech apps and platforms, they don’t typically compare with those offered by banks.
When to choose a bank
So when should you choose a bank over a credit union? The answer is different for everyone, but here are some situations in which a bank may be the better choice for you and your money.
- You don’t meet the eligibility requirements. In order to become a credit union member, you’ll need to meet its eligibility requirements. Banks, on the other hand, may have requirements for specific accounts but don’t generally require anything in particular from their customers.
- You’re looking for nationwide availability or local branches. No matter where you go, there are some banks you can find in virtually every city. If you prefer to bank with an institution that has brick-and-mortar branches wherever you live or visit, a bank may be your best option.
- You prefer a household name. If you’re looking to bank with a well-known institution, there are many household names from which to choose. For example, brands such as Chase and Citibank are available nationwide and offer everything from personal and college checking accounts to loans, credit cards, and more.
When to choose a credit union
Credit unions may be less ubiquitous, but that doesn’t mean they are never a good idea. Here are some reasons to choose one.
- You prefer a more personalized experience. Credit unions are owned and controlled by their members, so the banking experience tends to be more personalized and based on customer service. You may even be able to curate a package of products that meets most of your financial needs, including banking, insurance, investing, and more.
- You want better rates and fees. As credit unions are nonprofit organizations, they don’t lean as heavily on squeezing maximum fees and finance charges out of members. Instead, you’re likely to find that accounts have lower (or no) fees, savings interest rates are higher, and loan interest rates are more competitive.
- You meet the membership requirements. If you meet a credit union’s membership requirements, consider whether joining is the right call for your financial needs. Some credit unions are offered to military members and their spouses, others are based on workplace affiliations, and some are reserved for members of specific communities.
Most popular banks and credit unions
Are you curious as to which banks and credit unions are the most popular in your area? Here’s a look at the common institutions in some of our biggest cities.
New York
Chase Bank is the most popular bank in New York state, with the majority of its branches lying within New York City limits. This isn’t too surprising, as Chase is also the largest bank in the United States, with the most branches. Chase Bank offers a wide portfolio of products to its customers, including checking and savings accounts (both personal and business), CDs, loans, credit cards, and investment portfolios.
Bethpage FCU is the largest credit union in the Empire State. It has 33 total branches throughout the state, though only a handful are located in the NYC area.
Chicago
While Chase Bank is also the most popular bank in Illinois, BMO Harris is considered the largest bank in the city of Chicago. In fact, BMO Harris is headquartered in Chicago.
In terms of credit unions, Alliant Credit Union easily takes the top spot in Chicago, and in Illinois as a whole.
Los Angeles
Not surprisingly, Chase Bank is also the largest bank in California. In Los Angeles specifically, though, the top spot is held by City National Bank, which is headquartered there. It offers personal and business checking and savings, investment products, loans, credit cards, wealth management, and more.
The biggest credit union in Los Angeles is SchoolsFirst FCU, a California-based financial institution with more than 70 branches, most of which are located in Los Angeles and Sacramento.
TIME Stamp: Banks are bigger and broader; credit unions are more personalized
Banks and credit unions provide slightly different financial services to customers looking for banking, lending, credit, or even investment products. Both types of institutions can meet your financial needs and offer federal insurance for your deposits, and both can be found throughout the country. The one that’s right for you depends on your eligibility, product preferences, and even the type of experience and access you need most.
Frequently asked questions (FAQs)
How long does it take to get a loan from a credit union?
If you’re an existing credit union member, taking out a new loan can often be completed the same day, sometimes in just minutes. Getting approval depends on the type of loan you’re after, how much you’re hoping to borrow, and when you apply.
How do you close a bank or credit union account?
The process for closing a bank or credit union account varies based on the financial institution. You typically won’t be able to close your account unless you have a positive or zero balance. If your account is in the negative, you may be asked to raise it to zero before account closure is approved. Closing the account can sometimes be done online, or you may be required to visit a local branch to complete the process.
How long does an international wire transfer take for credit unions and banks?
An international wire transfer is usually debited from your account within hours or minutes, but it may take up to two days to arrive at the recipient’s financial institution, and up to another two days to get to the recipient. This time line depends not only on your financial institution but also on the receiving institution, the receiving country, and even the date on which the transfer was initiated. In most cases international transfers are completed within two to four business days, but there are exceptions.
The information presented here is created independently from the TIME editorial staff. To learn more, see our About page.
