Credit Unions vs. Banks: How to Decide - NerdWallet (2024)

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Credit Unions vs. Banks: How to Decide - NerdWallet? ›

If you want higher deposit rates and don't need access to branches across the country, for example, you might prefer a credit union. If you want access to in-person services and don't mind lower interest rates, a bank might be more suitable.

One option isn't necessarily better than the other across the board, though. Rather, the choice between a bank or a credit union typically depends on your financial circ*mstances and personal preferences. Here are some scenarios in which one might work better than the other for certain savers.

Credit unions tend to offer lower rates and fees as well as more personalized customer service. However, banks may offer more variety in loans and other financial products and may have larger networks that can make banking more convenient.

People choose banks primarily because of the convenience of multiple branches across the country, along with better technology. On the flip side, people choose credit unions primarily because of discounted loan rates, higher interest rates and better customer service.

Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.

First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.

Like we hinted at in the last reason, Credit Unions are known to have better and lower loan rates compared to big banks because our profits go right back to our members in the form of great deals. Expect lower interest rates and bigger returns with a Credit Union.

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.

One question that often arises is, "Are Credit Unions Safer than Banks?" If you're looking for a short answer, you'll be happy to know that we're not making you read the whole post: Credit Unions and banks are roughly identical in safety because deposits at both are insured by the Federal government to $250,000.

What is one reason that a credit union is better than a bank? ›

Better interest rates: Credit unions typically offer higher interest rates on savings accounts because they have lower overhead costs than banks. Similarly, they offer lower interest rates on loans. Customer service: Credit unions pride themselves on offering better customer service than banks.

Alliant Credit Union is fully digital and has the best APY across all accounts compared to other credit unions on our list. With a $100 minimum balance, Alliant's high-yield savings account earns 3.10% APY. Its share certificates also earn excellent rates as high as 5.20% on a 12-month jumbo certificate.

The main benefits of a credit union compared to a bank are that credit unions tend to offer better rates, better customer service, and lower fees. However, banks may offer more branches and products than credit unions.

Above all, one of the most acclaimed credit union advantages is that all deposits remain secured. You won't lose your hard-earned money because the National Credit Union Association (NCUA) backs credit union deposits. Each depositor's account is insured for up to $250,000.

The NCUA insures credit union accounts, while the FDIC provides insurance for bank accounts. They both come with the same limits on insurance coverage. A decision about whether to store money in a credit union or bank shouldn't be affected by which federal agency insures the institution.

Credit unions are generally considered to be safer than banks during economic downturns due to their conservative approach to risk and their emphasis on financial robustness.

Should you choose a credit union over a bank? It's really a personal decision. While banks may offer more services and products, credit unions typically have lower fees and better customer service. It's also not bad to join a credit union if their focus is on a specific profession you're part of.

Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned back to members in the form of reduced fees, higher savings rates and lower loan rates.