Should you switch from a bank to a credit union?


Kelsey Cruz

Kelsey Cruz

Blog author Kelsey Cruz

Kelsey Cruz is a feminist blogger from the city of brotherly love who is obsessed with bourbon, black blazers, and blow-out bars. She loves to cook and is always up to swap smoothie recipes. Mostly, though, she likes long walks on the Philly streets with her pit-boxer Henry of whom she will definitely show you pictures. Follow her on Twitter @kelsey_cruz.

Published June 3, 2016|4 min read

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Growing up my parents belonged to a credit union and a bank, and I never knew the difference. I just knew their credit union was smaller (yet warmer and friendlier) and their bank and its ATMs were on every corner. In my adult life, I now know more of the differences, but I also know not much has changed.So does Kristen Christian, a California girl who got fed up with big banks and their high fees. She got so fed up, in fact, that four years ago she started a social media page to vent and called on people to commiserate, asking them to switch from banks to credit unions. And on November 5, 2011, after her passion caught on like wildfire, she named the day "Bank Transfer Day."But, like anything else, there are pros and cons to both credit unions and banks, so let’s explore them before making the switch.

What is the difference between credit unions and banks?

Since credit unions offer the same thing banks do – checking accounts, CDs, loans, and credit cards – they may seem very similar or even identical. However, the main difference between banks and credit unions is ownership and how they make money. Banks are for-profit, usually public, and full of board members and shareholders. Credit unions are nonprofit, usually small and local, and run by member-owners who are usually unpaid and elected by vote.When it comes to credit unions and banks, think about the movie You’ve Got Mail. Do you want The Shop Around The Corner (i.e. credit union), the adorable albeit expensive independent bookstore that Meg Ryan inherited from her mom? Or do you prefer Foxbooks (i.e. bank), Tom Hanks’ multi-million dollar franchise that boasts coffee, club chairs, and reasonably-priced merchandise? Credit unions are all about their members and keeping them happy while banks are more about making money and pleasing their shareholders.Fortunately, your money is safe regardless of which place you choose because both credit unions and banks are both protected by the federal government: The Federal Deposit Insurance Corporation (FDIC) insures deposits at banks and the National Credit Union Administration (NCUA) insures deposits at credit unions.

Okay, but how does that affect how they actually work?

For starters, you have to learn some new terminology. For example, banks have savings accounts while credit unions have share accounts. Banks have customers while credit unions have members.But it’s not just about the words they use. Banks and credit unions differ in other ways:


Banks are open to all while credit unions are more restrictive and affiliated with specific regions, people, or groups. (Pro tip: Find a credit union here!)


Banks (branches and ATMs) are everywhere. Even the largest credit unions can’t compete with the sheer volume of banks and what they offer including 24/7 customer service, morning and evening bank hours, and technological advances including online banking and apps. That being said, what credit unions may lack on the app store, they strongly provide in customer service (which is severely lacking at big banks, in my opinion).


Banks tend to have higher fees than credit unions. They also have low interest earnings on deposit accounts, high interest rates on loans, and high overdraft fees. However, they have incredible credit card rewards. When it comes to credit unions, however, be prepared to pay a one-time membership fee which usually costs between five and twenty dollars. And although banks usually don’t have membership fees, most require a minimum amount to open an account with them.


Since banks are for-profit, they pay state and federal taxes. But since credit unions are nonprofit, they do not (although they still pay payroll, sales, and property taxes). Because credit unions are exempt from paying state and federal taxes (and since they’re non-profit), they’re able to maintain cheaper rates.In a nutshell, the pros of credit unions are that they tend to have better service, lower fees, better rates, customer-focused banking, and a more personal approach. However, the cons of credit unions are that they have fewer branches, fewer ATMS, less convenience, and poor online options.

Who is switching?

Fee-conscious people who are sick of big banks making all the big bucks and being on hold for seven hours.Oh, and students.Credit unions – especially university-affiliated ones – are great options for students. In fact, there are about six hundred credit unions nationwide that are either educational or health institutions. University-affiliated credit unions often try to help students build and maintain good credit habits by (occasionally) waiving fees, waiting a few days to charge late fees, or holding classes about credit cards.

Which is better?

Honestly, it’s all about personal preference. You have to ask yourself what you want and decide which is best for you and your money. Are low rates on loans or high rates on deposits important? Or is convenience and accessibility all you really need to be happy? If you don’t need a lot of fanfare, credit unions are a solid choice. But if accessibility and convenience are what you need, you should probably choose a bank.Ask around, shop around, and do your due diligence. Research and find out what works best for you. Money – both having and saving – is pretty important so make sure you find a place that protects it all.