News & Trending Banking News

11 Pros and Cons of Joining a Credit Union Instead of a Bank

Understanding the benefits and drawbacks of credit unions can help you make an informed financial decision.

Customers sitting inside bank
Updated July 15, 2024
Fact checked

We receive compensation from the products and services mentioned in this story, but the opinions are the author's own. Compensation may impact where offers appear. We have not included all available products or offers. Learn more about how we make money and our editorial policies.

Choosing where to manage your finances is a critical decision. 

With many people considering credit unions as an alternative to traditional banks, it's important to understand the differences between the two if you’re thinking about opening a new bank account.

Here, we’ll explore the pros and cons of joining a credit union instead of a bank to help you make an informed decision.

If you’re over 50, take advantage of massive discounts and financial resources

Over 50? Join AARP today — because if you’re not a member you could be missing out on huge perks. When you start your membership today, you can get discounts on things like travel, meal deliveries, eyeglasses, prescriptions that aren’t covered by insurance and more.

How to become a member today:

  • Go here, select your free gift, and click “Join Today”
  • Create your account (important!) by answering a few simple questions
  • Start enjoying your discounts and perks!

Important: Start your membership by creating an account here and filling in all of the information (Do not skip this step!) Doing so will allow you to take up 25% off your AARP membership, making it just $12 per year with auto-renewal.

Become an AARP member now

Pro: Credit unions offer many of the same functions as banks

Drazen/Adobe happy couple communicating with female real estate agent

Credit unions provide a wide range of financial services that you would find at a bank. These include checking and savings accounts, loans, mortgages, and IRAs. 

You don’t have to sacrifice any major financial functions by choosing a credit union over a traditional bank.

Pro: Enjoy lower fees and lower interest rates on loans

U-STUDIOGRAPHY DD59/Adobe signed on paper

One of the biggest advantages of credit unions is that they generally charge lower fees and offer lower interest rates on loans compared to banks. 

Since credit unions operate as not-for-profit entities, they can afford to return more value to their members rather than prioritizing profits for shareholders.

Pro: Higher rates on deposit accounts

SizeSquare's/Adobe increase percent icon

Credit unions often provide higher interest rates on savings accounts and other deposit products compared to large national banks. This can help you maximize the returns on your deposited funds, making your money work harder for you.

Resolve $10,000 or more of your debt

Credit card debt is suffocating. It constantly weighs on your mind and controls every choice you make. You can end up emotionally and even physically drained from it. And even though you make regular payments, it feels like you can never make any progress because of the interest.

National Debt Relief could help you resolve your credit card debt with an affordable plan that works for you. Just tell them your situation, then find out your debt relief options.1

How to get National Debt Relief to help you resolve your debt: Sign up for a free debt assessment here. (Do not skip this step!) By signing up for a free assessment, National Debt Relief can assist you in settling your debt, but only if you schedule the assessment.

Try it

Pro: There are member benefits

peopleimages.com/Adobe women with documents for discussion

When you join a credit union, you become a part-owner and have a say in how the institution is run. This means you’ll have input on leadership elections and key policies. 

Plus, many credit unions offer member-exclusive benefits, such as discounts on various services and products through partnerships.

Pro: There's deposit insurance coverage

Timon/Adobe ncua on screen

Similar to the Federal Deposit Insurance Corporation (FDIC) coverage provided to banks, credit union deposits are insured by the National Credit Union Administration (NCUA) up to $250,000 per account, per depositor. 

This ensures your money is safe and protected against potential losses.

Pro: There are shared branches

oscargutzo/Adobe row of people to the bank teller

Credit unions often participate in a shared branch network, allowing members to access banking services at other credit unions’ branches nationwide. This is known as a co-op shared branch network. 

This cooperative model expands your access to in-person banking services even if your credit union has limited locations.

Pro: Credit unions tend to be community-based

New Africa/Adobe business partners shaking hands

Many credit unions focus on serving specific communities, which fosters a strong local presence and personalized customer service. This community-based approach often includes support for local initiatives and giving back to the areas they serve.

Con: Fewer branch locations

Yuliia/Adobe looking at mobile phone

A major downside of credit unions is that they typically have fewer branch locations compared to large national banks. This can be inconvenient if you prefer in-person banking or if you travel frequently and need access to branches in different areas.

Con: Specific membership requirements

stockbusters/Adobe employee reading papers

Credit unions often have specific membership eligibility criteria based on factors like where you live, work, or worship. This can limit your options if you don’t meet the criteria for membership in a credit union you’re interested in.

Earn cash back on everyday purchases with this rare account

Want to earn cash back on your everyday purchases without using a credit card? With the Discover®️ Cashback Debit Checking account (member FDIC), you can earn 1% cash back on up to $3,000 in debit card purchases each month!2

With no credit check to apply and no monthly fees to worry about, you can earn nearly passive income on purchases you’re making anyway — up to an extra $360 a year!

This rare checking account has other great perks too, like access to your paycheck up to 2 days early with Early Pay, no minimum deposit or monthly balance requirements, over 60K fee-free ATMs, and the ability to add cash to your account at Walmart stores nationwide.

Don’t leave money on the table — it only takes minutes to apply and it won’t impact your credit score.

Apply for a Discover Cashback Checking account today

Con: There can be membership fees

Grandbrothers/Adobe  green card that says member

Some credit unions charge membership fees to join or require annual dues. While these fees are usually nominal, they can be a drawback compared to banks that don’t have such requirements, which can help you keep more cash in your wallet.

Con: Limited mobile access and fewer online services

Tetiana/Adobe displeased female worker

Credit unions may not offer as robust mobile banking options as larger banks. Their mobile apps and online services might lack some of the advanced features found in the apps of major banks, which can be a disadvantage if you rely heavily on digital banking.

Bottom line

Delmaine Donson/peopleimages.com/Adobe multiracial corporate staff,

Choosing between a credit union and a bank depends on your personal financial needs and preferences. 

While credit unions offer benefits like lower fees, higher deposit rates, and a community-focused approach, they also come with potential drawbacks such as fewer branches and limited mobile banking features.

Consider what aspects are most important to you in a financial institution to make the best choice.

Are you willing to trade convenience for better rates and lower fees, or do you prioritize extensive branch networks and advanced digital services? Reflect on your priorities to decide which option will help you make the best smart money move.

Lucrative, Flat-Rate Cash Rewards

5.0
info

Wells Fargo Active Cash® Card

Current Offer

$200 cash rewards bonus after spending $500 in purchases in the first 3 months

Annual Fee

$0

Rewards Rate

Earn unlimited 2% cash rewards on purchases

Benefits and Drawbacks
Card Details