Should you use a credit union or a bank?

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Know the difference.

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As you reach financial milestones in life, you may need to rethink where to keep your money so it’s easier to manage. There are two primary financial institutions to choose from if you want your accounts to be protected by federal insurance: credit unions and banks.

One big difference to consider is ownership. Credit unions are not for profit; they are owned by their members. Banks are run for profit and are usually owned by investors. But there are other differences, too.

Both banks and credit unions offer basic financial products and services, including:

But there are some differences to consider.

Ownership. Banks are operated for profit and are usually owned by investors. Business decisions might be made to benefit shareholders. In contrast, credit unions are not-for-profits owned by members; the board of directors answers to those members.

Banks might be large institutions that have publicly traded stock, or they can be smaller community institutions with a personal touch. Credit unions are often small. Although they can be nationwide in scope, they may offer more of a community feel compared to big banks.

Membership requirements. Credit unions might require that you live in a specific geographic area, belong to a particular organization, or work for a certain employer in order to qualify as a member. To remain active, you must also keep a minimum amount in a “share”—or savings—account.

There are no membership requirements for a bank. Depending on the account you open, there might be minimum balance requirements, but your account usually won’t be closed even if you don’t have money in the bank.

Product availability. Banks generally have a wider variety of available products and services. Credit unions often focus on basic financial needs like savings and checking accounts and providing loans. Banks might offer private wealth management, trust management, and investment services.

Interest rates. You’ll also likely see different interest rates on various products and services. Although some banks (especially online-only banks) offer higher yields on CDs and savings accounts than the national average, credit unions are often competitive.

For example, for the third quarter of 2023, the National Credit Union Association reported these average rates across the nation:

Although market and economic conditions might see banks edging out credit unions on interest rates, in many cases, you’ll get a better deal with a credit union. Their not-for-profit structure comes with tax benefits that banks don’t see, and credit unions pass those savings on to members.

You want to know your money is safe—wherever you keep it. The good news is that your funds are probably safe in either type of financial institution. Most banks and credit unions are covered by federal insurance.

Banks pay premiums to the Federal Deposit Insurance Corporation (FDIC), while credit unions pay the National Credit Union Administration (NCUA). In both cases, individual accounts are protected for up to $250,000 at each institution.

Your choice between a credit union or bank may come down to the type of financial institution you want to do business with.

If you like the idea of local control and membership, a credit union can make sense—as long as you meet the requirements to become a member. But if you’re more interested in a wider variety of products and are unconcerned about investor ownership, a bank may better suit your needs.

Of course, you can always open accounts with both types of institutions. When you’re shopping for a car loan, a local credit union may offer better rates and customer service. An online-only bank may offer a higher annual percentage yield (APY) on your savings, while a large brick-and-mortar bank may satisfy customers who need a vast branch network.