Original Post By Devan Goldstein


If you’re choosing between credit unions and banks, look at key differences like profit models, interest rates and branch access to figure out which aspects are most important to you.

Why choose a credit union?

  • Typically has higher interest rates on deposits.
  • Emphasis on customer service.

Why choose a bank?

  • More branches in the region or across the country.
  • Typically quicker to roll out new apps and other tech.

What to ask

How much each charges for checking accounts, including monthly maintenance and overdraft fees. Credit unions have traditionally been cheaper for checking accounts, but NerdWallet’s investigative team says that’s no longer true. The only way to know is to check with each institution.

The difference and why it matters

At bottom, banks are for-profit enterprises, while credit unions are not-for-profit. Credit unions in principle exist to serve a community of people tied by a “bond of association,” which may be based on location, employer, faith, membership in another organization, or other factors.

To serve its community, a credit union provides financial products on the most favorable terms it can afford to offer. This means that instead of offering accounts to customers and large dividends to a small group of owners, as banks do, credit unions offer small dividends — and discounted loan rates and other benefits — to a large group of members.

Choosing between a bank and a credit union involves some tradeoffs. Credit unions generally provide better customer service than banks do, though the ratings for smaller banks are nearly as good. Credit unions also offer higher interest rates on deposits and lower rates on loans. Banks often adopt new technology and tools more quickly. Broad ATM and branch networks are the norm for big banks; credit unions keep up with large, cooperative networks of ATMs and shared branches.

Making your choice

  • Identify what matters to you most and make a prioritized list of what you’re looking for
  • Find your top contenders; you may want to look at NerdWallet’s recommended credit unions and national banks
  • Narrow the list based on your top criteria. Other aspects to consider: Do some on your list perform better in ways you might value in the future (such as having a great digital experience or extensive ATM access)? Do any negatives (higher fees, too few branches) change your mind about which to choose?

More to Learn

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