Credit Unions vs. Banks in 2023: Differences & How to Choose the Best One for You

May 25, 2023

Credit Unions vs Banks 2023In the wake of the Silicon Valley Bank collapse, many Americans have questions about how this could impact their finances along with the safety of their money in a bank or credit union. And these are fair concerns.

On the surface, banks and credit unions are very similar as they both offer a number of similar services, including checking and savings accounts, loans, and debit cards. However, there are key differences that distinguish credit unions from banks. Here are five main differences:


One, if not the biggest, difference between banks and credit unions is that credit unions are not-for profit organizations, and their profits are dispersed among members. Meanwhile, banks are for-profit, meaning they are either privately owned or publicly traded organizations. This means that banks often have shareholders who have a claim to part of the bank's assets, something bank customers do not. This is why banks' rates and fees are made with an effort towards generating the most profit to please shareholders, which can work in opposition to their members.

Interest Rates and Fees

As a result of the difference in structure, credit unions often offer higher interest rates on savings accounts (helping your money grow faster) and lower rates on loans (making it cheaper to borrow money for a big purchase). Another component of this is credit unions usually have lower costs than banks. Thus, credit union accounts don't usually have the minimum balance requirements or monthly maintenance fees that many banks do.

PFCU prides itself on offering the lowest fees possible to our members. This includes absolutely no fees or minimum balance requirements for checking accounts. For savings accounts, the minimum balance to open an account is only $5, and it's just $50 to obtain annual percentage yield (APY), which is the interest you earn from the money in your account.


Since credit unions are community focused organizations, you typically have to be a member of a credit union's home community to become a member. Alternatively, you can usually join big banks regardless of where you live. These larger banks have branches and ATMs all across the country, whereas credit unions will only have them in their core service areas.

To improve access to their members and customers, both banks and credit unions offer many of their services through their website and mobile apps. For example, on the PFCU app, members can securely view their balances, deposit checks, transfers funds within their account or to other members, pay bills, locate ATMs, and more.


Both banks and credit unions have insurance measures in place for customers in case a financial institution were to fail. Both are backed by different agencies that provide similar protections.

Credit unions are insured by the National Credit Union Administration (NCUA). The NCUA is a government agency that supervises and regulates credit unions. One of the jobs of the NCUA is to manage the National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF guarantees that money in credit union accounts is backed with the full faith and credit of the US government. The NCUSIF provides up to $250,000 in coverage for each single ownership account. For jointly owned accounts, the NCUSIF insures an additional $250,000 for each account holder.

Bank customers are backed by the Federal Deposit Insurance Corporation (FDIC). The FDIC is an independent agency of the US government that insures your deposits and will reimburse you up to the legal limit of $250,000 if the FDIC-insured bank fails. 

Both options are provided to customers automatically once an account at an insured institution is opened.

Customer Service

Another difference between banks and credit unions is the customer service component. Credit unions are smaller, community focused organizations. This means you're likely to become more familiar and build a relationship with credit union employees and can expect more of a hands-on approach. Being engrained in your community allows credit unions to provide more personalized service based on your specific financial needs. 

Big banks all have a more national focus, making it harder for them provide service that is just right for you. Most national banks have a more automated customer service program, which can make it harder to speak with an actual person if you have questions.

While banks and credit unions provide many of the same services, they certainly have a number of distinct differences. Both provide a similar level of peace of mind with their insurance protocols, but they differ with their rates, level of personalization, and accessibility. It's important to understand what these differences are when selecting your financial institution.

Erin Ellis

Erin Ellis
Community Relations Specialist and Accredited Financial Counselor ®
Philadelphia Federal Credit Union

National Association of Federal Credit Unions 
PFCU is a proud member of the National Association of Federal Credit Unions
National Credit Union Administration 
Your savings federally insured to at least $250,000 and backed by the full faith and credit of the United States Government. National Credit Union Administration, a U.S. Government Agency.
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Please note that the amount of money contained in your investment accounts are considered non-deposit products and therefore, are not NCUA insured, not credit union guaranteed, may lose value, are not guaranteed by any government agency. Securities, Financial Planning and Insurance products are offered through LPL Financial, and its affiliates, Member FINRA, SIPC. LPL Financial and Philadelphia Federal Credit Union are independent entities.