Own Your Bank

How Credit Unions and Banks Differ

Picture: Five light bulbs in total. Four light bulbs are all green and positioned upside down while the fifth is yellow and positioned right-side up. Used to describe the differences between banks and credit unions.

Open an account in a credit union and you're a member. Do the same with a bank and you're a customer. The use of these two separate terms – member and customer – is meaningful. It reflects the substantial differences between these financial institutions in organizational structure and ownership, and ultimately, what consumers care about most – fees and interest rates.

The vast majority of banks are for-profit, publicly held corporations whose earnings are distributed to stockholders. Credit unions, on the other hand, are not-for-profit cooperatives owned by members. Earnings are paid back to members in the form of lower service fees, higher interest rates on deposits and lower interest rates on loans. 

So whether you're a saver or borrower, your nearby credit union will probably be more rate competitive than your local bank. In 2014, for example, the average interest rate on member credit cards was 4% lower, their account fees were two times less on deposits of similar size, and their 1-year CDs earned an average of .20% more. 1

When it comes to convenience, banks and credit unions generally are comparable. Banks are known for multiple branch locations, large ATM networks, and online banking. Although relatively smaller in size and breadth, a credit union offers these same benefits by participating in cooperatives that share branch locations and thousands of ATMs worldwide. 

In terms of deposit insurance, members and customers enjoy the same $250,000 of protection in the event of institutional insolvency. The Federal Deposit Insurance Corporation protects bank customers and The National Credit Union Share Insurance Fund covers member deposits. 

Despite these similarities, credit unions and banks differ in another important way: Banks are open to everyone, and customers may have little to nothing in common, whereas credit unions are open only to a "field of membership." While at one time, the "field" was very limited, this isn't the case any longer; almost everyone can find a credit union they are eligible to join. For example, the only thing today's members may have in common is their geography, such as the town or county where they live.

Can't decide which financial institution is best for your needs? Start by comparing products, services and rates, then talk to friends and family about their experience and read online comments and reviews. Whether you leaning to credit unions or banks, you'll find all the competition for your money translates into plenty of consumer choice.


See how credit unions compare in fees to a national bank.

Greater Texas

National Bank

Monthly Checking Fee

None

$10 (None if $1,500 daily balance is maintained)

Minimum Balance

None

None

Online Bill Pay

Free

Free

Foreign ATM Surcharge

First 5 are free per month, $1 per transaction thereafter

$2.50 per transaction

Insufficient Funds

$25 per item

$35 per item

Overdraft

$3 per transfer

$12.50 per transfer

Stop Payment

$25 each

$31 each

Cashier’s Check

$3 each – when made payable to someone other than the member

$10 each

Money Order

$1 each

$5 each



1
Stango & Zinman, Dartmouth College and University of California, Berkley Informa Research