The average American consumer interacts with a bank or credit union daily, whether they realize it or not. These two financial institutions offer checking and savings accounts, certificates of deposits (CDs), loans, and various other products and services. However, there are various noteworthy differences that you should consider when you’re choosing between a bank and a credit union. For example, banks often have a widespread presence in the United States, making them more convenient. On the other hand, a credit union may only have locations in a particular city or state.

Not sure how to decide between a bank and a credit union? Let’s explore the essential differences between the two:

Fees

Banks are for-profit, and credit unions are non-profit organizations that don’t have to pay federal income taxes. Therefore, it makes sense that banks charge higher fees to rake in more profit for the benefit of their shareholders. Be it overdraft or stop payment fees, you’ll typically end up paying more if you use a bank. For example, the average credit union customer pays $3.00 less for non-sufficient fund (NSF) fees compared to someone who uses a bank for their financial needs. Although $3.00 doesn’t sound like much, credit unions collectively save consumers millions of dollars each year. Nevertheless, banks have a handful of advantages over credit unions that might make the additional fees worth it.

Convenience

Banks are undoubtedly more convenient than credit unions because of their sheer size. No matter where they are, it’s typically easier for bank customers to find a local branch and make a cash deposit or get a cashier’s check. Let’s take Wells Fargo – one of the largest financial institutions in the world. The bank currently has 5,200 branches across the United States. Then there’s East Alabama Community Federal Credit Union, which only has one location in Opelika, Alabama. As you can imagine, accountholders at East Alabama Community Federal Credit Union don’t have the advantage of depositing or withdrawing cash nationwide. However, credit union members often prefer personable service over a Fortune-500 banking institution.

Technology

Online banking has come a long way in the last decade – customers can deposit checks using a mobile application, instantly request stop payments, and even open new accounts without visiting a local branch. Well-established banks, such as Wells Fargo, Chase, and Bank of America, have the most advanced online banking platforms with an extensive collection of robust tools. These banks have in-house developers that continuously improve the customer’s experience. On the other hand, credit unions don’t often have the resources to develop rich online banking platforms. Therefore, credit union customers often must make frequent visits to the local branch because they don’t have the same remote capabilities that banks offer.

Interest Rates

Credit unions are notorious for offering better interest rates than banks. That is, you can receive a lower interest rate on a loan and a higher interest rate on your savings account (a double win). Many people often speculate, “how can credit unions offer better rates?” The answer is clear – credit unions are non-profit and serve their members. On the other hand, banks are often publicly-traded companies that strive to boost their net income to please their shareholders. Therefore, banks tend to have higher interest rates on various products – mortgages, car loans, and personal loans, to name a few.

Insurance: NCUA vs. FDIC

Both banks and credit unions have insurance to protect their customer’s deposits. The main difference is that banks have Federal Deposit Insurance Corporation (FDIC) insurance. In contrast, credit unions have National Credit Union Administration (NCUA) insurance. When comparing NCUA vs. FDIC insurance, the differences are negligible. However, it’s essential to note that FDIC and NCUA insurance both protect $250,000 worth of deposits.

Customer Support

Since banks have more resources and a more prominent presence, it’s no surprise that they offer better, more accessible customer support. Many large banks have a customer support line that’s available 24/7. Credit unions typically only provide support through standard business hours (Monday – Friday from 9:00 am – 5:00 pm). Some customers overlook credit unions’ limited hours of operation because they prefer personalized support. When they call the credit union, they’ll likely speak to someone they’ve seen in person or someone that knows their name. When you call a large bank, you may end up talking to someone on the other side of the country.

Product Offerings

Banks and credit unions offer your standard products – checking and savings accounts, mortgages, personal loans, and certificates of deposits (CDs), for example. Banks tend to provide more products and services in investing, such as Individual Retirement Accounts (IRAs) and money market accounts. Furthermore, it may have staff members specialized in investment offerings and money management.

Pros of Credit Unions

• Lower interest rates
• Personalized customer service
• Non-profit
• Members can vote on decisions
• Community-oriented

Cons of Credit Unions

• Fewer product offering
• Customer support isn’t as accessible
• Limited online banking tools
• Fewer locations than banks
• Membership fees

Pros of Banks

• A broader selection of products and services
• Advanced mobile banking applications
• Numerous locations across the United States
• Dedicated fraud departments
• Customers can typically open an account online

Cons of Banks

• Higher fees
• Lower interest rates on deposits
• Higher interest rates on loans
• Customer support isn’t as personable
• Banks place a significant emphasis on shareholder needs

Banks vs. Credit Unions: Which One Is Better for You?

As you can see, banks and credit unions share many similarities, but both are unique in their own ways. If you only need a checking and savings account and don’t travel often, a credit union might suit you well. However, if you want advanced mobile banking tools and around-the-clock customer support, you’d be better off choosing a bank.

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