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Credit Union vs Bank: Which is Better & Safer for Your Money?

Jordan Beaumont
Financial Guru
Updated: 6/2019
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Credit Union vs BankWhen an individual earns money, they can store their cash in various places. Stowing every last dollar under the mattress is always an option. However, banks and credit unions remain the most practical and realistic options. Hundreds of credit unions and banks operate across the country. Each one offers checking and savings accounts designed to meet consumers’ needs. In reality, credit unions stand out as the best solution for most consumers, and it’s hard to argue in favor of the alternatives.

Table of Contents

Should Consumers Store Their Cash Under The Mattress?

Of course not! Consumers should always keep cash on hand, but they shouldn’t store significant amounts of money at home. By doing so, a given person opens themselves up to unnecessary risks, and they miss out on various opportunities to amass wealth. A couple hundred dollars hidden in the mattress might make sense for many people. Anything more than that is a waste of opportunity to say the least. Money at home doesn’t grow interest and doesn’t benefit from capital gains through investment.

How About Depositing Money Into A Traditional Bank?

Millions of consumers rely upon traditional banks to store their cash and investments. Sadly, banks feature the worst reputations among consumers. Such a negative reputation is more than earned by the industry as a whole. The country’s largest banks nearly collapsed the economy back in 2008. Wells Fargo more recently ripped off consumers to the tune of billions of dollars and received a slap on the wrist in comparison. In simple terms, banks suck, and Consumers do not need banks to handle their banking.

Credit Union vs Bank

Making An Argument For Credit Unions

Credit unions remain the best alternative to the mattresses and banks of the world. Virtually all credit unions are built as a cooperative between members. Typically, all members can borrow from cumulative deposits at competitive interest rates. Every credit union serves its individual members rather than prioritizing profits. Countless CUs operate across the country and serve their members every day. Luckily, many consumers qualify to join one of these cooperatives and reap the benefits today.

All types of organizations and companies start credit unions. The smallest CUs are run by volunteers and may only feature a dozen members. On the other hand, large corporations and organizations may start a credit union to serve employees. A typical consumer can name at least a handful of credit unions in their area. Regional and national CUs remain the best known. Small, local CUs might not feature much name recognition due to a low member count and limited eligibility among the population.

Consider the example of two completely different credit unions.

Navy Federal Credit Union is the largest CU in the nation by a large margin. More than seven million consumers call NFCU home for their banking needs. Surprisingly enough, NFCU started in 1933 with less than a dozen members. Eligibility requirements for Navy Federal include active or retired military members, or civilian contractors, and their families. Navy Federal serves millions of Americans each day, rewarding the individuals and families that serve the country today or served in the past.

Arkansas AM&N College Federal Credit Union couldn’t be more different than NFCU. This particular CU started operations in 1952 yet serves less than 1,000 people. In 1952, employees of the college opened the credit union to benefit the faculty. Only current faculty, alumni, and family members are eligible to join this credit union. Another 50 years might not see the membership numbers reach 3,000 people. A more niche credit union is hard to find, although they do exist.

What Makes Credit Unions Just Like Banks?

All credit unions offer the same products and services as traditional bank offers. This includes checking and savings accounts as well as credit cards. From there, consumers can expect to find home, auto, and personal loans as well. Other products include high yield CD, cashier’s check, and even safety deposit boxes. Technologies utilized include online banking and bill pay services. Without a doubt, consumers will feel comfortable at their local credit union after switching over from their lackluster bank.

How Credit Unions Set Themselves Apart From Traditional Banks

Traditional banks answer to their investors and must generate a profit for them. Most banks utilize legitimate means like earning interest on deposits to achieve this goal. In some cases, fraudulent means are utilized in order to generate profits, like the case of Wells Fargo mentioned previously. A large number of banks charge hefty fees in order to generate further profits, and these fees eat into consumers’ cash flows. It’s not surprising that consumers often don’t agree with how banks operate these days.

Conversely, credit unions serve both their owners and members. A credit union needs to meet a certain bottom line in order to remain financially sound and in operation. CUs otherwise thrive by operating in the best interest of their members, though. Simply put, credit unions charge lower fees than traditional banks and offer better interest rates, too. Most consumers won’t encounter high minimum balance requirements and other frustrating mandates from their local credit unions, which is always a good thing.

At a traditional bank, loan approvals of all types are based upon numbers alone. Many consumers that could repay a loan are disqualified based on credit score alone. Credit unions take a more humanistic approach to loans and lines of credit. Therefore, a typical CU looks at other factors to determine whether someone is suitable for a loan. This personal approach to banking allows CUs to make exceptions for long-term members that have exhibited solid banking habits over time.

Credit Union vs Bank

How Safe Is One’s Money At A Bank or Credit Union?

If a consumer leaves their money under the mattress, they take a major risk. For instance, a house fire could wipe out a person’s entire cash reserve. People that take this approach risk having their money stolen or destroyed in some manner. The mattress solution for storing cash is never a viable option for consumers. By taking such a large risk, consumers all but guarantee something will go wrong eventually. No consumer should store their money in this fashion, except in limited amounts.

The excellent news is both credit unions and banks keep consumer funds safe. Even financial insolvency won’t necessarily cause a consumer’s money to disappear. For traditional banks, funds up to specified limits are insured by Federal Deposit Insurance Corporation (FDIC). Credit unions are instead protected by National Credit Union Share Insurance Fund (NCUSIF), another federal program. Most CUs receive baking by NCUSIF, aside from a handful of state-chartered credit unions.

Both FDIC and NCUSIF insurance cover up to $250,000 in funds per account. This means funds in checking and savings accounts are protected up to that limit. These days, the average person doesn’t have anywhere near that amount stored in a single account. Such individuals don’t need to worry about losing their funds to insolvency or other issues. Then again, consumers with higher funds should spread their money out across multiple accounts to avoid breaching the $250,000 coverage figure.

How Can Consumers Join A Credit Union?

Everyone can join and open new bank account services easily; not everyone can join every credit union. Each credit union implements eligibility requirements for membership. Likely, members will be required to work in a certain occupation or meet a residency requirement. Other requirements include joining a not-for-profit organization or donating a certain amount to charity. Perhaps the most simple requirement often seen mandates that new members simply open a savings account and make a deposit.

As previously mentioned, Navy Federal caters to members of the military and their families. College-based credit unions cater to faculty or alumni. All CUs control how they admit new numbers. Enough credit unions exist in this country that a CU is available for each and every consumer. By and large, new members will receive quite a few benefits, including low interest rates and a personal banking relationship. It’s hard to argue against looking for a local, regional, or national credit union today.

Credit Union vs Bank

So, Which One Is Better For Your Money?

Traditional banks feature their benefits and disadvantages. In the end, the list of disadvantages often runs longer than the benefits. Credit unions tend to play out in the opposite way. Members receive far more benefits than headaches. A traditional bank simply cannot compete with a credit union on rates and overall service. With a credit union, members will feel at home and like their best interests are being looked after. CUs serve their members day in and day out without trying to nickel and dime everyone.

Credit unions aren’t perfect and don’t suit everyone’s needs, though. In rural areas, credit unions may feature limited locations and amenities. Not all CUs have embraced photo deposits and other features associated with even the smallest banks. Fee-free ATMs aren’t always available with credit unions that don’t have a ton of locations. Undoubtedly, consumers need to keep these shortcomings in mind. The average CU tends to increase its product and service offerings with each passing year.

Every single credit union thrives by serving every single one of its members. Banks operate with the sole intention of earning profits for investors. After thinking about these facts, most consumers would opt to embrace their local credit union. CUs continue to grow in popularity and cumulative membership today. Overall membership numbers won’t overtake traditional banks any time soon. Nonetheless, more and more consumers embrace credit unions in order to reap all of these benefits and more.

Take a look at the following pros and cons for both credit unions and traditional banks:

Credit Union Pros

  • Higher interest rates on deposits; lower rates on loans and lines of credit
  • Lower fees, and sometimes fees are seemingly non-existent
  • A more personal banking relationship with higher flexibility

Credit Union Cons

  • Fewer online services and sometimes fewer products
  • Smaller CUs may lack saturation in a given area with very few locations
  • Some CUs include very strict eligibility requirements for potential members

Traditional Bank Pros

  • A large number of locations and no-fee ATMs
  • A large selection of products and services

Traditional Bank Cons

  • Low interest rates on deposits, and high rates on loans or lines of credit
  • High fees and lacking customer service remain the norm
  • No flexibility when it comes to loan or credit line approvals

FAQ

General Bank Account Questions

This section covers the basic questions you have about bank accounts. 

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How to make a bank account?

It’s easy to open a bank account. You just need to walk in to the bank or go to their website and tell them you’d like to open an account. Follow the process to do so.

How many bank accounts should I have?

That depends on your particular needs. You should use bank accounts to organize your money and make sure you cover your budget.

How to make a bank account online?

You can make a bank account online by going to a bank’s website. The site will walk you through the process of setting up a bank account.

Is a credit union a bank?

A credit union preforms many of the same services as a bank. The difference is the ownership. A credit union is owned by the members, and a bank is a for-profit company.

How many bank accounts can I have?

There’s no limit to the number of bank accounts you can have. You can have multiple accounts at multiple banks.

Can you have two bank accounts?

Yes, you can have two bank accounts with the same bank, or two bank accounts at different banks.

How to put money in bank account?

You can put money in a bank account by depositing it with the bank. You can do this at an ATM, at the bank, or even through direct deposit from your job.

Different Types of Bank Accounts

We’ll answer your questions about different types of bank accounts in this section.

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How to set up a trust fund bank account?

Each bank has its own process for establishing a trust. You should talk to your bank to see what you need to set a trust fund up.

What are the advantages of a bank savings account?

A bank savings account is good because it lets you save money and earn money on your savings through interest. Also, your deposit is insured by the federal government.

What banks have the best interest rates on savings accounts?

Usually online banks have the best savings interest rates. These banks have lower overhead, so they can usually pay better.

What are the best online banks?

That depends on what you’re looking for. Some of the most popular online banks include Ally Bank, Salem Five Bank, Radius Bank, and iGObanking.

What is a joint bank account?

A joint bank account is an account that’s held by two or more people at the same time. All holders have access to the funds in the account.

What is a pod bank account?

A POD bank account is a payable on death account. The money is held in the account until the primary dies. It is the disbursed to the account’s beneficiaries.

How Bank Accounts Work

This section will help you understand how bank accounts work.

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What is online banking and what is its purpose?

Online banking is a service that performs all the things a bank does, but that doesn’t have a physical location. Its purpose is to provide an alternative to traditional banks with lower overhead and better prices.

How long can my bank account be negative?

There’s no limit to the amount of time that your bank account can be negative. It will remain negative until you make a deposit that covers the balance.

What do you need to set up a bank account?

Each bank has their own procedures for setting up a bank account. You’ll need to check with the bank you’re considering to see what they need. For example Chase Bank open account procedures are different than US Bank.

What is a bank account nickname?

A bank account nickname is a secondary name you give an account to help you organize it. It’s useful if you manage multiple accounts and don’t want to memorize account numbers.

Can I block a company from my bank account?

That depends on the specifics of your case. You’ll need to contact your bank to see what they can do to help you.

Can my spouse access my bank account?

Not unless the account is jointly held or your spouse is listed as an authorized user of the account.

What banks do not charge a monthly fee?

That depends on the kind of product you’re talking about. Capital One, Wells Fargo, and most online banks don’t charge a monthly fee for either checking or savings account.

How long can a bank restrict your account?

That depends on your situation. You should talk to your bank or a lawyer to get more information about your specific case.

Other Bank Account Questions

We’ll answer your bank account questions that don’t fit into our other sections here.

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Which bank is best for refinancing?

That depends on your particular situation. It’s usually a good idea to check with the bank you have the most accounts with or have been with the longest. These banks will usually cut you a deal on your rates.

Does cashback show up on bank statement?

Yes, cashback will show up on your bank statement. The formatting and location it shows up depends on your particular bank.

When does a bank earn interest?

A bank earns interest anytime someone makes a payment to the bank. The payment covers the money they owe and the interest the bank charges them.

Which bank has the best savings account?

That depends on what you’re looking for. Most consumers have found that online banks will usually give better returns than traditional brick and mortar banks.

General Credit Union Questions

This section answers the basic questions you need to know to help you understand how credit unions work.

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How to join a credit union?

Every credit union has its own guidelines for who can join and how. You’ll need to talk to the credit union you’re interested in to find out more.

Why are credit unions better than banks?

Some people like credit unions more than banks because a credit union is a non-profit operation. That means that rates can be lower because there’s not as much of a need for a profit.

Who uses banks and credit unions?

Most consumers and businesses use banks and credit unions. These institutions securely store your money and give you access to things like debit cards, credit cards, and other financial products.

How are credit unions similar to banks?

Credit unions are similar to banks in that they provide many of the same services, like checking accounts, savings accounts, and loans.

Can I join a credit union?

Probably. There are several credit unions that have very limited or no restrictions on their membership.

Are all credit unions the same?

No, each credit union has its own different rules and regulations. However, all credit unions have some similarities in the services they provide.

How Credit Unions Work

We’ll help you understand how credit unions work in this section.

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How to join a credit union with bad credit?

The best way to join a credit union with bad credit is to find a credit union that doesn’t check credit as a condition of joining.

What is a member number for credit union?

A member number for a credit union is the number that the credit union uses to identify you and track your accounts.

Do credit unions check your credit?

Sometimes, it depends on the credit union. All credit unions will tell you what the requirements are to joint the union.

What are the requirements to join a credit union?

Each credit union has different rules about who can join. You should ask a specific credit union about their requirements to see if you can qualify.

Different Credit Union Services

This section will answer some of the most popular questions about credit union services.

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Is it better to refinance through a credit union?

Sometimes. We always recommend checking your rates with multiple organizations to ensure you’re getting the best deal.

Do credit unions help build credit?

That’s not the goal of a credit union, but a credit union can help you build your credit through various products and services they offer.

Do checking accounts earn interest in credit unions?

Sometimes. It depends on the specific credit union and the specific type of checking account you have.

How to buy a car through credit union?

You can buy a car through a credit union by becoming a member of the credit union and qualifying for an auto loan through them.

Do credit unions have credit cards?

Yes, credit unions offer credit cards just like banks do. These are the same credit card networks you get at a bank, like Visa and Mastercard. Some of them even have prepaid credit cards.

Do credit unions have safe deposit boxes?

Most credit unions have safe deposit boxes as one of the services they provide. However, it depends on the specific credit union.

Can a credit union cash savings bonds?

Yes, a credit union can cash savings bonds. Credit unions can perform all of the same services that you get at a bank.

Does the credit union do mortgages?

That depends on the specific credit union, but in most cases, yes. Most credit unions have the same kind of loan products you get at a for-profit bank.

What is a cd at a credit union?

A CD is a certificate of deposit. It’s a type of financial product where you store money at the credit union and the credit union pays you to keep your money with them.

Do credit unions offer life insurance?

Some do. You’ll need to check with the specific credit unions you’re considering to see if they have a life insurance product you’re interested in.

Other Credit Union Questions

We’ll answer common credit union questions that don’t fit into our other categories here.

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What is the best credit union?

The best credit union is the one that meets your needs at the lowest possible rates. Check with the credit unions in your area to see which you qualify for and who has the best options for you.

Is Union Bank a credit union?

No, Union Bank is a regional bank that operates primarily on the west coast.

Is USAA a bank or credit union?

USAA is not a credit union. It is a for-profit bank that specializes in financial products for current and former military members and their families.

How to check balance on credit union card?

The best way to check the balance on a credit union card is by logging into your account via their website. You can also call the credit union for help during their normal business hours.

Where can I cash a credit union check?

You can cash a credit union check anywhere that cashes checks. Credit union checks will be accepted by any check casher.

Jordan Beaumont

Jordan Beaumont

Financial Guru

Jordan's work focuses on helping people reach their financial goals so they can spend more time with family and friends and less time worrying about their budget. After finishing college with a degree in Accounting and Communication, he realized that these are the most important things in life and that people shouldn’t miss out because of money.

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