Credit Union vs Bank: Which Is Better for Your Business?

Banks and credit unions are financial institutions that provide a variety of business banking products and services. A bank operates for-profit and is available to anyone, while a credit union is a nonprofit financial institution that’s only for its eligible members. Credit unions often offer lower fees and higher annual percentage yield (APYs) and, recently, credit unions have been more aggressive when it comes to matching the central bank’s rate hikes.

Credit Union vs Bank at a Glance

	Credit Union	Bank
Available Products	Business savings and checking accounts, business loans, credit cards, investment, and insurance services	Business savings and checking accounts, business loans, credit cards, investment, and insurance services
Monthly	$0 to $20	Could go as high as $35
Deposit Insurance	Covered by National Credit Union Administration (NCUA)	Covered by Federal Deposit Insurance Corporation (FDIC)
Network Availability	Limited branches available—most are part of shared branches and ATM networks nationwide	Big traditional banks have branches and ATMs available nationwide—online-only banks don’t have physical branches
Interest Rates	Typically offers higher interest rates on deposits and lower interest rates on loans because credit unions are nonprofit institutions	Traditional banks typically offer lower rates on deposits and higher rates on loans—online-only banks offer higher interest rates on deposits
Technology & Online Banking Experience	Yes—however, functions may be limited	Yes—for both online-only and traditional banks

Available Products

Both banks and credit unions offer the same types of financial products and services, including business savings, certificates of deposit (CDs), money market accounts, checking accounts, business loans, commercial real estate financing, business credit cards, investment services, and business insurance. However, smaller credit unions for business may only offer basic business banking products, such as business savings and checking accounts, and may not provide other services that are available with big banks.

Monthly Fees

Since banks are structured to earn profits, they typically have more (and higher) fees compared to credit unions. However, some banks also offer free business checking accounts, especially those that operate fully online. While many credit unions offer free checking accounts with no minimum balance requirements, some charge fees on certain types of business checking accounts.

Deposit Insurance: FDIC vs NCUA

Both banks and credit unions offer an equally safe place to deposit your business funds. Banks are covered by the Federal Deposit Insurance Corporation (FDIC) while credit unions are covered by the National Credit Union Administration (NCUA). If a federally insured bank fails, your total deposits are covered by FDIC insurance up to $250,000. Similarly, the total deposits of credit union members are insured by NCUA insurance up to $250,000.

Network Availability

Most big traditional banks have several physical branches and large ATM networks available nationwide, while some smaller banks have just a limited number of branches and ATMs. Internet banks don’t have physical branches because they only operate online. While credit unions typically have a limited number of branches, most of them are part of a network that allows access to shared branches and ATMs nationwide.

Interest Rates

Credit unions typically offer lower interest rates on loans and higher APYs on deposits; this is because credit unions are organized as nonprofits. Online-only banks may offer lower loan rates and higher deposit rates compared to their brick-and-mortar counterparts because they don’t have the same operational expenses as traditional banks.

Technology & Online Banking Experience

Since big banks have higher budgets for technology, their online and mobile platforms are typically more advanced than those of most credit unions. Banks tend to do more technical upgrades and offer more functions and features with their online banking services. However, although rare, you can also find credit unions that provide seamless digital and mobile banking options.

It’s important to check the bank’s or credit union’s web-based and mobile banking platforms before you open a business account to ensure that they have all the features and functions you need.

Key Statistics Comparing Banks & Credit Unions

	FDIC-Insured Banks		Federally Insured	Credit Unions
	June 2021 (Q2)*	June 2022 (Q2)*	June 2021 (Q2)*	June 2022 (Q2)*
No. of Banks/CU	4,950	4,771	5,029	4,853
Total Assets**	$22,774	$23,718	$1,977.20	$2,136.50
Total Loans**	$10,858	$11,772	$1,193.30	$1,387
Net Income**	$70.376	$64.405	$21.3	$18

*Q2 is second quarter.

**Dollar amounts in billions.

The number of FDIC-Insured banks in the second quarter of 2022 is now at 4,771, a slight decline from last year’s 4,950.
Similar to banks, the number of Federally Insured Credit Unions also declined from 5,029 in the second quarter of last year down to 4,853 in the same quarter of this year.
Total assets in FDIC-Insured banks have grown by $944 billion, or 4.1%.
Total assets in Federally Insured Credit Unions increased by $159.3 billion, or 8.1%.
Total loans in FDIC-Insured banks increased by $914 billion, or 8.4%.
Total loans in Federally Insured Credit Unions increased by $193.7 billion, or 16.2%.
The net income of FDIC-Insured banks has decreased to $64.405 billion compared to last year’s second-quarter net income of $70.376 billion, a difference of $6.0 billion or 8.5%.
The net income of federally insured credit unions has reduced from $21.3 billion in the second quarter of 2021 down to $18 billion in the second quarter of 2022, a difference of $3.3 billion or 15.5%.

Sources: FDIC and NCUA

When To Choose Each

A credit union is best for business owners who need only basic business banking products and services, are eligible for membership, such as live or work in a certain area, part of an eligible organization, and don’t need to access physical branches nationwide. It’s best to choose a credit union if you’re looking for business bank accounts that have fewer fees and offer higher interest rates.

Pros & Cons of Credit Unions


PROS	CONS
Fewer fees—some even offer fee-free banking	Limited branches
Higher interest rates on deposits	Need to be eligible for membership to open an account
Prioritize strong customer service	Few credit unions offer a wide selection of banking products and services

Business owners who are looking for a wide selection of business banking products and services should consider a full-service bank. If you need to access a physical branch, consider opening an account with a traditional bank. Otherwise, a purely digital bank may be a better option if your business doesn’t process cash transactions often and won’t need to access an in-person branch.

Pros & Cons of Banks


PROS	CONS
Traditional banks have more physical branches and ATM networks nationwide	Usually charge higher fees than credit unions
Offer a wide range of business banking products and services, including various loan options and business financial services	Typically offer lower interest rates on deposits
Available to anyone—no need for membership	Typically offer high interest rates on loans

Trends & Predictions for Banks & Credit Unions

Consumers prioritizing omnichannel banking experiences: According to J.P. Morgan, customers who prefer in-person banking relationships also want the ability to access self-serve options on their own time. This makes it necessary for banks and credit unions to have strong digital platforms available via web and app.
Increasing partnerships between financial institutions and financial technology (fintech) companies: The Cornerstone Advisors survey’s results showed that in the last three years, 65% of banks and credit unions had at least one fintech partnership and 35% invested in a fintech company. Fintech partnership activity has only grown since, especially among banks. In 2019, the average bank partnership with fintech was 1.3 per institution but increased to 2.5 partnerships in 2021. Banks’ average investment in fintech also surged from $2.3 million in 2019 to almost $10 million in 2021.
Banks consolidating their branches: According to S&P Global Market Intelligence, closure rates for bank branches are especially focused on in-store branches. Data from last year shows 17.4% of banks’ in-store branches have closed, with large banks such as U.S. Bank, Wells Fargo, and JP Morgan Chase taking massive efforts.
Growing membership for credit unions: The NCUA Quarterly Credit Union Data Summary states that credit union membership has been increasing yearly since 2016. In Q2 of 2022, the total number of credit union members has risen to 132.6 million from 127.2 million during the same period in 2021, a marked increase of 5.4 million or 4.3%.

Bottom Line

Are credit unions better than banks? When deciding whether a bank or a credit union is right for your business, it’s important to consider your business’s banking needs and priorities. Go with a credit union if you’re eligible for membership and prefer better customer service and a more intimate banking setup. If your priority is more advanced technology and an array of banking products and services, then working with a bank may be a better option.