What Is the Difference Between a Bank and a Credit Union?

The main difference between a bank and a credit union is that banks are businesses run for profit where clients are considered customers, whereas credit unions are not-for-profit organizations where customers are investors or part owners. Other differences include accessibility, fees, interest rates, customer service and insurance.

When customers deposit money in banks, the banks make investments of that money profitable for investors, whereas credit union profits are distributed back to members through better rates, lower fees and dividends. Credit unions typically do not charge fees for checking accounts, but banks levy significant fees from customers for monthly account maintenance, overdrafts and the use of out-of-network ATMs. Credit unions also usually offer interest rates to members for savings and checking accounts, while banks rarely pay interest on accounts. Because credit unions are small local organizations, they often offer better customer service to their members.

Banks offer better accessibility because of their size and ability to offer more branches and better mobile and online technology, whereas credit unions are typically set up to service specific areas or industries and have no physical presence beyond their parameters. Both banks and credit unions have insurance protection from the U.S. government. Banks are protected by the Federal Deposit Insurance Corporation, and credit unions are protected by the National Credit Union Share Insurance Fund administered by the National Credit Union Administration.