Advantages of Credit Unions

A credit union is a member-owned nonprofit cooperative that provides financial services to its members. Because credit unions are member-owned, they are not answerable to shareholders, so profits are returned to members in the form of lower loan rates or fees and higher interest rates on savings.

Membership in a credit union includes people with a common bond. They may live in a particular area or work for the same company. Deposits at credit unions are federally insured up to $250,000 per depositor, which is similar to banks.

What Is a Credit Union?

A credit union is a member-owned, not-for-profit cooperative, meaning everyone cooperates for the common good of members. While a credit union operates similarly to a bank, it is answerable only to its members, who see benefits from lower interest rates on loans and higher interest rates on savings. Banks are for-profit businesses that are owned by investors and governed by a Board of Directors.

A credit union’s mission means it prioritizes members’ financial well-being, not profits. The goal is to use financial wherewithal to help members. A volunteer Board of Directors runs the individual credit union.

A credit union can also be community-oriented because it invests some of its profit back into the public. This can be done by giving loans to underserved neighborhoods, supporting local businesses, or supporting local charitable organizations.

Pros of Credit Unions

Better rates on loans. Better rates on savings accounts. Lower rates on fees. Those are the three reasons for joining a credit union.

Because a credit union is owned by members with similar interests or employment, and because it is not-for-profit, its goal is to help members by taking whatever steps possible to support members.

Better Rates & Lower Fees

Because credit union profits go back to members, a credit union can offer lower loan rates and higher savings rates on high-yield savings accounts. Members can even receive better rates on car loans and share certificates (which banks call certificates of deposit), and lower interest rates on credit cards. Credit unions also typically do not have as many fees as banks, and if they do, they are often not as expensive.

Taken together, this is called developing passive income. Because they are saving and/or gaining on rates, members benefit by relying on credit unions for financial decisions.

Favorable Terms & Flexibility

Credit unions sometimes can provide more flexibility in loan terms. This includes adjusting a repayment schedule by changing the number or frequency of installment payments. They can also be more lenient about credit assessments, which makes financial products more accessible.

This does not mean credit unions ignore risk. It simply means they may be able to be more flexible than a bank, where rules and regulations can be stricter.

Personalized Service & Community Connection

Customer service at a credit union tends to be more relationship-driven and localized. The people who work at the credit union often are members of the community the institution serves.

Credit unions also support their communities. For instance, LorMet Community Federal Credit Union in Lorain County, Ohio, supports local food banks, financial literacy in local schools and a local leadership academy.

The goal is to create a community-oriented financial institution that understands the needs of the community it serves.

Shared Accessibility Networks

Credit union members have access to shared-branch networks that include thousands of ATMs and branches nationwide. Credit unions provide this service by partnering with other credit unions via CO-OP Solutions or Shared Branching.

Shared Branching is a network of credit unions throughout the country that works together to provide services to all credit union members. These services are typically in person.

CO-OP Solutions provides access to 5,600 ATMs at branches nationwide. These CO-OP ATMs can be found from a contact at your credit union, or through an online search.

Safety & Trust

The National Credit Union Administration (NCUA) was founded by Congress in 1970. This government agency insures deposits for credit unions, acting the same way the Federal Deposit Insurance Corporation (FDIC) does for banks.

With credit unions, the NCUA provides up to $250,000 in coverage for each single ownership account. A joint ownership account is insured for up to $250,000 per owner.

Because of their not-for-profit status and strong community ties, credit unions are perceived as stable and trustworthy. In theory, this means they are more careful with the money they have.

Cons of Credit Unions

While a credit union is appealing, it might not be for everyone. Membership may rely on certain work, residential or occupational requirements. If you don’t meet the criteria, you can’t be a member. And while credit union networks and ATM services are significant nationwide, they may not match the number banks offer.

Limited Accessibility & Reach

Banks have the financial firepower – the six major banks had a combined profit of more than $36 billion in the final quarter of 2024 — to provide a more extensive nationwide network of ATMs and branches. And while credit unions offer digital services, a bank may be able to offer more.

Membership Criteria

Credit unions have membership criteria, so you can’t just walk into any credit union and join. Examples: The Navy Federal Credit Union is the nation’s largest, but membership requires being an active or former member of the Armed Forces or a family member of either. The SchoolsFirst Federal Credit Union in California is for employees of the state’s schools and their families.

Narrower Product and Service Offerings

A bank can provide some services that a credit union cannot. While some credit unions have investment advisors and programs, credit unions were slower to wade into the world of investing, which reflects their cautious nature.

Yes, credit unions can offer financial advice, but their opportunity for wealth management may not be as extensive as some banks. Business services and specialized loans may also be more difficult to find at a credit union.

Technological Limitations

Because banks are bigger and have more available cash, their technology may be more up-to-date and extensive than a credit union’s. This doesn’t mean credit unions do not offer digital solutions, just that a bank may be more sophisticated with its mobile app, website, or new digital tools.

Credit Unions vs. Banks: A Comparison Table

No definition of a bank or credit union is exhaustive. A credit union may be more community-focused, but that does not mean a bank ignores community needs. A credit union may not have as many ATMs as a bank, but that does not mean it lacks ATM access. With that in mind, here’s a quick look at comparing a credit union and a bank:

Who Might Benefit Most from Joining a Credit Union

Credit unions are certainly popular. As of March 2025, more than 142 million Americans were members of the 4,411 credit unions in the country. The top eight credit unions have more than $20 million in assets.

Those who value slightly lower interest rates and a more personal and community-oriented experience would benefit most from joining a credit union. The community element should not be underestimated. Those who want to have their money in an institution with like-minded people and that understand their local environment, would do well to consider a credit union.

If you join a credit union, be aware that branch access may not be as easy as with a bank. Too, the phone app may not be as advanced as a bank’s, and the website may not have all the bells and whistles.

But if you are looking for a local, friendly financial institution that understands you and your community, and that provides some financial benefits, a credit union should be considered.

When a Bank Could Be a Better Fit

A bank could be a better fit if you travel a lot and need coast-to-coast access to a physical bank. Many of the nation’s top banks have branches throughout the nation.

A bank, too, could offer more detailed financial planning, as well as more complete investment, wealth, or business solutions, as well as state-of-the-art online and mobile banking platforms.

There really is no wrong answer when choosing a bank or credit union. The only right answer is the one that serves your financial situation.

Tips for Choosing the Right Credit Union

If you’re lucky enough to be able to join a credit union through your workplace or profession, it’s worth looking into what it offers, and whether it’s a better option for you than a bank.

The key factors that go into the decision are:

• Can you join the credit union you are considering? This is step one in any decision about a credit union. Alliant Credit Union, for instance, has been around since 1935 and is now a fully digital entity; it has 90,000 members and several different ways to qualify for membership.

• Rates and costs. Compare loan interest rates, fees, and terms across credit unions and banks.

• Accessibility. How available are branches and ATM networks, and what are the strengths of their digital platforms?

• Verify NCUA insurance and confirm coverage. Be sure the credit union is insured by NCUA.

• Check reviews. Assess member reviews or community involvement indicators to gauge service quality. Also see what they offer. Alliant, for instance, offers checking, savings, credit cards, loans, investments, and several different insurances.

Is a Credit Union Right for Me?

Credit unions offer compelling benefits, from better rates to lower fees to strong community focus. But they also have trade-offs that include limited reach and fewer products.

If you are inclined, there is no law against using both a credit union as well as a bank. A bank may fit your investment needs, while a credit union may fit your savings and loan needs.

The “best fit” depends on your state of mind and financial situation, but especially on your priorities and preferences. The best way to approach this decision is with an informed comparison.

Take your time. Study your options. Then make the best decision based on the best information you can find.

FAQs About Credit Unions

Are my deposits safe at a credit union?

Credit union deposits are fully insured by the federal government through the NCUA. The NCUA provides up to $250,000 in coverage for each single ownership account (savings, checking, etc.). A joint ownership account is insured for up to $250,000 per owner, so if you have an account with your wife, husband, or partner, you both are insured. Federally insured credit unions must display the NCUA sign at each branch and on their website. If you don’t see the sign, ask.

Can anyone join a credit union?

Anyone who qualifies for membership in the credit union may join. Membership may be dependent on an employer, union membership, military service, or locality. The 7/17 Credit Union partners with 1,100 businesses in Ohio and accepts those who live in one of six eligible counties. The Partners Credit Union takes members who are employees of Disney and their family members. Ask your HR department if there is a credit union affiliated with your employer. If not, conduct a search through NCUA here.

Do credit unions offer more forgiving loan approvals?

The nonprofit status of credit unions means their goal is to benefit members, to put profits back toward helping the members and the surrounding community. As a result, a credit union may be more flexible about a home interest rate and may have less stringent approval requirements. A credit union may be more able to look past a low credit score if you have significant savings or a high-paying job. Because credit unions are member-owned, they know their customers well and may be able to provide more flexibility on a variety of financial products.