Why do people choose credit unions?
Credit unions go beyond standard banking, offering lower fees on loans, higher dividend rates on accounts, and more personalized member benefits. Unlike for-profit banks focused on maximizing shareholder profits, credit unions are member-owned, non-profit financial institutions.
Credit unions operate to promote the well-being of their members. Profits made by credit unions are returned back to members in the form of reduced fees, higher savings rates and lower loan rates.
The Bottom Line. Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.
- Credit Union Benefits.
- Better Rates on Savings Products.
- Lower Rates on Borrowing Products.
- Lower Fees.
- Member-Owned Financial Services.
- Up to $250,000 Insured.
- Perks and Free Education.
- FAQs.
The largest credit unions in the U.S. include Navy Federal, State Employees', PenFed, Boeing Employees', SchoolsFirst, Golden 1, America First and Alliant.
Can a government take your savings? Through “right of offset,” the government allows banks and credit unions to access the savings of their account holders under certain circumstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.
Credit unions tend to offer lower fees than banks. This is because of their not-for-profit business structure and their tax-exempt status. Rather than paying shareholders, credit unions are able to reinvest their earnings back into their members, decreasing the need to charge fees such as overdraft penalties.
Better rates
Overall, credit unions offer higher savings rates, lower loan rates, and have fewer and lower fees when compared to banks.
One question that often arises is, "Are Credit Unions Safer than Banks?" If you're looking for a short answer, you'll be happy to know that we're not making you read the whole post: Credit Unions and banks are roughly identical in safety because deposits at both are insured by the Federal government to $250,000.
Why avoid credit unions?
Credit unions may be local or regional, with limited branches outside of your area. If you travel or move, this can make getting in-person help difficult. May have fewer services. While many larger credit unions offer all of the same services banks do, some provide a limited range of products and services.
Weaknesses of Credit Unions
Membership is restricted. The membership of a credit union is restricted to a specific community, most often a religion, profession, or geographic location. For a member to be eligible to join a credit union, they must belong to a group listed in the credit union's charter.
Because credit unions are not-for-profit, they can offer members numerous benefits that can directly and indirectly build an individual's credit score.
Consumer finance experts recommend that people maintain about five to six months of cash in their savings account to cover medical emergencies, mortgage or rent, utilities, loan and payments, and other necessary expenditures.
Credit unions go beyond standard banking, offering lower fees on loans, higher dividend rates on accounts, and more personalized member benefits. Unlike for-profit banks focused on maximizing shareholder profits, credit unions are member-owned, non-profit financial institutions.
Credit unions aim to serve members by offering competitive products with better rates and fees than you see with a for-profit bank. Like a bank, credit unions charge interest and account fees, but they reinvest those profits back into the products it offers, whereas banks give these profits to its shareholders.
Millionaires often spread their wealth across multiple accounts and financial institutions to maximize insurance coverage. This includes a mix of checking, savings and investment accounts, both in banks and credit unions.
| Financial Institution | Why We Picked It |
|---|---|
| Blue Federal Credit Union | Best Overall |
| Liberty Federal Credit Union | Best for Checking |
| Alliant Credit Union | Best for a Savings Account |
| Service Credit Union | Best for Military Individuals & Families |
As in prior years, Navy Federal Credit Union, State Employees', and PenFed are the largest credit unions by asset size. Top 10 American Credit Unions by Asset Size: Navy Federal Credit Union ( $178,025,662,227 total assets) State Employees' Credit Union (SECU) ($55,872,490,853 total assets)
Credit unions and banks are both insured, with most banks being insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per customer. Most credit unions are similarly insured by the National Credit Union Administration (NCUA) for up to $250,000.
Can credit unions run out of money?
Like banks, credit unions can fail, but their failure is far less common and the financial fallout is mild by comparison. In 2023, for example, five bank failures represented a total of $549 billion in assets, and the First Republic Bank closure in 2024 impacted $6 billion alone.
What Accounts Can the IRS Not Touch? Any bank accounts that are under the taxpayer's name can be levied by the IRS. This includes institutional accounts, corporate and business accounts, and individual accounts. Accounts that are not under the taxpayer's name cannot be used by the IRS in a levy.
- Eligibility requirements may limit customers. Credit unions typically serve a specific geographic location or community of people.
- Limited physical branches.
- Fewer options and perks for credit cardholders.
- Limited access to online banking.
Credit unions are a great option for many people, and they provide a range of perks that big banks simply can't, such as a more personalized banking experience, lower rates on loans, and higher rates on savings accounts.
Credit unions are regulated by the National Credit Union Administration, or NCUA, or by state agencies. The NCUA oversees the safety and soundness of all credit unions. If you want to check up on your credit union, make sure it's federally insured by the NCUA and look at its finances, you can do that any time.
