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

Banks and credit unions can appear very similar on the surface. They both provide checking and savings accounts, provide loans, and perform other standard banking services. So, then what makes a credit union different from a bank?


The primary distinction between banks and credit unions is who owns them. For the most part banks, like other corporations, are owned by their investors. They operate as a business and are expected to generate profit for those investors.

On the other hand, credit unions are owned directly by their members. They are non-profit organizations, meaning that they are both tax exempt and do not need to generate a profit beyond what is needed to continue operating. 

This means that if you open an account at a credit union, you own a small share of that credit union. Credit unions often hold elections for the organization’s leadership positions. By voting in these elections, members of the credit union are able to exert some amount of control over the union as a whole.


Both banks and credit unions offer basic banking services like savings accounts and mortgages, but they can differ heavily on the details.

Because credit unions don’t need to generate a profit, they tend to charge lower interest rates on loans, and pay higher interest rates on member accounts. As one example, according to the National Credit Union Administration data for June, the average interest rate on a new car loan at a credit union was 3.01%, while the average interest rate at a bank was 4.80%.

However, because they are usually much smaller operations than most banks, credit unions sometimes do not offer the same variety of services. For instance, Bank of America offers over 20 different credit card options, while the second largest credit union in the country, the State Employees’ Credit Union, offers only one.

Additionally, banks tend to have better apps and websites, as well as many more ATMs available nationwide. This is not always true, however, as some credit unions are part of national ATM co-ops, which allow members of one credit union to use the ATMS of any other co-op member.


Reader Questions