Bank Savings Accounts vs. Credit Union Savings Accounts: What’s the Difference?

It's more than just rates and fees

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Both banks and credit unions offer savings accounts, but you’re likely to find differences in interest rates, fees, ATM availability, and eligibility requirements.

Credit unions, as not-for-profit, member-owned institutions, often offer higher interest rates and lower fees on savings accounts than banks. Banks tend to offer a larger number of in-network ATMs, which can provide more convenience.

Learn more about how savings accounts at banks compare to savings accounts at credit unions so you can choose the account that best meets your banking needs.

What’s the Difference Between Bank Savings Accounts and Credit Union Savings Accounts?

The terms and services with savings accounts at banks and credit unions will vary with the individual institution. Here are some general differences between banks and credit union accounts, but keep in mind that they don’t necessarily apply to every institution.

  Bank Savings Account Credit Union Savings Account
Structure For-profit Not-for-profit
Eligibility No membership requirements; typically requires a minimum deposit Must meet membership criteria, which may be based on location, employer, or other factors
Savings Rates Typically lower, especially at brick-and-mortar banks Typically higher
Physical Branches and ATMs Often more branch and ATM locations (although community banks may have fewer locations) May have fewer branch and ATM locations
Customer Service May not be an emphasis Often a priority
Deposit Insurance Insured for up to $250,000 by the FDIC Insured for up to $250,000 by the NCUA

Structure

Banks are for-profit institutions owned by investors or private organizations. Their goal is to earn profits for shareholders through the services they provide customers.

Credit unions are not-for-profit and are owned by their members. Members can vote on credit union policies and decisions. Note that some credit unions call savings accounts “share accounts” or “share savings accounts” to reflect their member-owned structure.

Banks are more common among consumers, holding nearly 91% of deposits in the U.S. compared to credit unions’ 9% in 2021. However, credit unions represent a growing segment of the financial sector, according to the Credit Union National Association (CUNA).

Eligibility

Any adult can open a savings account at a bank, provided they can make the minimum required deposit and can provide required information and documentation, such as a photo ID.

To open an account with a credit union, however, you need to be a member or become a member by fulfilling membership criteria, which might be based on where you live, work, worship, or attend school.

Some credit unions are designed specifically for military servicemembers and their families whereas others welcome anyone who is part of a specific organization or association. Some credit unions have more flexible membership criteria. For example, PenFed Credit Union and Connexus Credit Union are open to anyone.

Interest Rates

Because credit unions are nonprofit, member-owned institutions, they tend to offer higher rates on savings accounts, allowing you to earn more on your deposits. For example, according to a CUNA report, the average interest rate on a regular savings account with a $1,000 balance in 2021 was 0.09% compared to banks’ 0.05%. On a one-year CD with $10,000, credit unions returned 0.35% while banks returned 0.16%.

While banks tend to lag behind credit unions with interest rates, online banks may have more competitive rates.

Online banks have the high overhead costs of brick-and-mortar locations, such as paying for leases and utilities, so they’re often able to pass on the savings in the form of higher rates on their savings accounts.

Physical Branches and ATMs

Banks usually provide access to a greater number of physical branches than credit unions, which can make them more convenient if you prefer in-person banking. National banks have branches across the country, but community banks generally are regional. Banks also tend to offer more ATMs.

If you opt for a small credit union, you might not have the convenience of branches and fee-free ATMs across the country. That said, many credit unions have formed a Co-op Shared Branch network that allows you to bank at more than 5,600 shared branches and 30,000 surcharge-free ATMs.

Customer Service

Credit unions are known for personalized customer service. As not-for-profit cooperatives, they typically prioritize members' needs. After all, the members are the owners.

Community banks also often pride themselves on customer service. Opting for a small, local institution, whether a credit union or bank, could provide a higher level of customer support than a bigger national bank.

Deposit Insurance

No matter if you have an account at a bank or credit union savings account, your deposits will be insured for up to $250,000. Bank deposits are insured by the Federal Deposit Insurance Corp (FDIC), and credit union deposits are insured by the National Credit Union Administration (NCUA).

If you have more than $250,000 to deposit, consider putting those funds in an account at another institution.

Which Is Right for You?

A credit union savings account may be right for you if:

  • Your priority is a high-interest rate and low fees.
  • You’re able to meet membership requirements.
  • You’re satisfied with the online or mobile banking experience.
  • Branch and ATM availability is less important to you.

A bank savings account may be right for you if:

  • You want the convenience of multiple branch locations and widespread ATMs.
  • More-personalized customer service isn’t a priority.

While credit unions typically offer better interest rates on their savings accounts than banks, this isn’t always the case. Consider shopping around at both banks and credit unions to find an account with the best rates and terms. As you explore your options, consider what you value in your banking experience so you can choose the right account for you.

The Bottom Line

Both banks and credit unions offer secure savings accounts for your cash. If you prefer a member-owned, not-for-profit institution with more personalized customer service, you might opt for a credit union, which tends to have higher rates and lower fees.

If you prefer the convenience of nationwide branch locations and ATMs, a bank might be the better option for you. Community banks often fall somewhere in the middle, as they may offer personalized customer service but lack the convenience of nationwide branches. Online banks are often able to offer high-yield savings account rates that are competitive with those provided by credit unions.

Frequently Asked Questions (FAQs)

Are credit unions better for savings accounts?

Credit unions are not necessarily better than banks for savings accounts, but they may offer some benefits. As member-owned cooperatives, credit unions are often able to offer better rates and lower fees on savings accounts. Plus, they often pride themselves on a high level of customer service.

What's the difference between a bank and a credit union?

Banks are for-profit institutions, whereas credit unions are member-owned, nonprofit institutions. Almost anyone can open a savings account with a bank, but you’ll likely need to meet membership criteria to open an account with a credit union.

What is the downside of a credit union?

Credit unions offer a number of benefits for members, but there are downsides. Small credit unions may not have the convenience of multiple branch locations and widespread ATMs that bigger banks do.

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Article Sources

  1. National Credit Union Administration. “How Is a Credit Union Different Than a Bank?

  2. Federal Deposit Insurance Corp. “FDIC: Deposit Insurance.”

  3. National Credit Union Administration. “Deposits Are Safe in Federally Insured Credit Unions.”

  4. Credit Union National Association. “State Fact Sheets.”

  5. Connexus Credit Union. “Membership Eligibility.”

  6. PenFed Credit Union. “Member Benefits.”

  7. Credit Union National Association. “Data and Statistics.”

  8. Co-op Solutions. “Co-op Shared Branch Networks for Credit Unions.”