Choosing where to deposit funds involves considerations beyond mere convenience, directly affecting interest earnings, fee structures, and customer treatment. While banks and credit unions provide comparable financial products, their operational foundations differ significantly.
Credit unions function as not-for-profit institutions owned by their members. As of March 2025, the National Credit Union Administration reports 4,411 credit unions operating in the United States. Members, who become part-owners upon opening an account, typically receive benefits from any profits. These include higher interest rates on deposit accounts, lower interest rates on loans, and generally reduced fees.
Membership in a credit union is governed by a defined field of membership. Eligibility can be based on factors such as employer, geographic location, or affiliation with specific organizations like the military, labor unions, or societies. Some credit unions maintain broader membership criteria accessible to many individuals.
Banks, in contrast, are for-profit entities owned by shareholders or parent companies. The Federal Deposit Insurance Corporation counted 4,462 banks in the U.S. as of March 31, 2025. Major national institutions include JP Morgan Chase, Bank of America, Wells Fargo, Citibank, and U.S. Bank, alongside smaller community banks serving specific regions.
The fundamental distinction lies in ownership and structure. Banks operate to generate profits for shareholders, often relying on fees and interest margins. Credit unions, as member-owned cooperatives, typically reinvest surplus earnings back into the institution or return value to members through improved rates and services. Each credit union member usually holds one vote in major decisions, irrespective of deposit size.
Deposit insurance presents another area of difference. Bank deposits are insured by the FDIC, providing coverage up to $250,000 per account holder. Credit unions are regulated by the NCUA and protected by its National Credit Union Share Insurance Fund, which offers equivalent insurance coverage. The NCUA notes no member has lost funds from an insured account due to a credit union failure.
Accessibility varies between the two. Banks generally accept any customer meeting basic account requirements. Credit unions enforce membership rules, though eligibility is often broader than perceived, with many serving entire regions. Some permit membership through family or household connections.
For individuals prioritizing savings and personalized service, credit unions frequently offer higher savings yields, lower loan rates, and reduced fees. The Credit Union National Association estimates these benefits equate to $149 per person and $313 per member household annually. Many credit unions emphasize relationship banking and community involvement. Their geographic footprint may be smaller, but shared branch and ATM networks help mitigate access concerns.
Banks may better suit those seeking convenience, advanced digital tools, or a national presence. Larger budgets enable banks to offer programs like no-down-payment mortgages, down payment assistance, and sophisticated mobile applications. They often provide integrated investing, wealth management, and business banking services. More extensive branch and ATM networks benefit frequent travelers. Potential drawbacks include higher fees and lower savings interest rates, particularly at large national institutions.
Both types of institutions provide secure environments for deposits. The appropriate choice depends on individual financial needs and preferences.