Credit Union vs Bank: Which Is Better for Your Business?
This article is part of a larger series on Business Banking.
Credit unions offer better rates on deposit accounts and loan products but are more restrictive in their membership. Membership requirements can range from a fee for joining up to specific geographic or employment requirements. Meanwhile, banks are available to all customers but often have lower deposit rates and higher loan rates than credit unions.
While both credit unions and banks offer products and services that can help your small businesses, you may find one preferable to the other depending on your business needs. Read on to learn which may fit your needs best.
When To Use Each
Credit Union
- You prefer fewer fees and higher interest rates on deposits: Credit unions allow business owners to save more by offering reduced fees and even fee-free services and products. They also provide higher rates of interest on deposit accounts than banks, making it easy to grow your business funds.
- You have basic business banking needs and are satisfied with fewer physical branches: If you only need essential products and services, then a credit union is suitable for you. Compared to banks, credit unions don’t have a lot of physical branches available nationwide.
- You prioritize strong customer service: Credit unions offer more personalized customer service since members own them.
- You’re eligible for membership: If you live or own a business in a certain area or are part of an eligible organization, then you can apply as a member of a credit union.
Here are three of the best credit unions:
Monthly Fee | Business Checking Annual Percentage Yield (APY) | Business Savings APY | Available to All Businesses? | Opening Balance Requirement | |
|---|---|---|---|---|---|
 | $0 or $15 | 0.05% or 0.10% | 0.10% | Yes | None |
 | $0 to $20 | 0.01% to 0.45% | Varies | No* | $250 or $255 |
 | $15; waivable | 0.05% | 0.30% | Yes | None |
*To become a member of Navy FCU, you must meet one of the following requirements:
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If you need recommendations, see our list of the best credit unions for small businesses.
Bank
- You need access to more physical branches and ATM networks nationwide: Traditional banks have brick-and-mortar branches in one or more states. They also have wider access to more ATM networks, making it convenient for their customers to perform transactions.
- You prefer a wide range of business banking products and services: A full-service bank offers various financial products and services, such as business checking and savings accounts, certificates of deposit (CDs), money market products, loans, credit cards, insurance, retirement plans, merchant services, and investments.
- You want to take advantage of advanced online and mobile banking options: Banks are equipped with great technology and offer a better online and mobile banking experience. If you don’t have a lot of cash transactions, consider opening an account with an online bank. A good starting point would be our guide to the best online business banks.
- You seek fewer restrictions for opening an account: Banks are inclusive and don’t require any membership.
Here are three of the best bank accounts:
Account Name | Monthly Fee | Free Monthly Transactions | APY | Free Cash Deposit Limit | |
|---|---|---|---|---|---|
 | Fundamentals Business Checking | $16; waivable | 200 | N/A | $7,500 per month |
 | Business Complete Banking | $15; waivable | 20 | N/A | $5,000 per month |
 | Business Checking | None | No limit | 2.0% on qualifying balances of $250k or less | $4.95 per deposit (Green Dot) |
*Provider is a financial technology (fintech) platform backed and Federal Deposit Insurance Corporation (FDIC)-insured through a supporting bank partnership with Coastal Community Bank.
Check out our roundup of the best small business checking accounts for our top recommendations.
Credit Union vs Bank at a Glance
Credit Union | Bank | |
|---|---|---|
OVERALL RATING | 3.6 out of 5★ | 4.4 out of 5★ |
Available Products | ★★★★ | ★★★★★ |
Monthly Fees | ★★★★ | ★★★ |
Deposit Insurance | ★★★ | ★★★★★ |
Network Availability | ★★★★ | ★★★★★ |
Interest Rates | ★★★★ | ★★★★ |
Technology & Online Banking Experience | ★★★ | ★★★★ |
Ownership/ Membership | ★★★ | ★★★★★ |
Rating Explanation: ★★★★★ 5: This feature enhances your financial experience at no cost. ★★★★ 4: This feature has a few minor drawbacks/limits or comes at a slight cost. ★★★ 3: This feature has a few drawbacks/limits or comes at a slightly high cost. ★★ 2: This feature has a few major drawbacks/limits and comes at a high cost. ★ 1: This feature has major drawbacks/limits. 0: This feature is unavailable. | ||
Credit Union: 4 out of 5
Credit unions offer business savings and checking accounts, CDs, money market products, business loans, credit cards, investment, merchant services, and insurance services. However, some smaller credit unions for business may offer only basic business banking products and lack robust services available at bigger banks.
Bank: 5 out of 5
Banks provide business savings and checking accounts, CDs, money market products, business loans, credit cards, retirement plans, merchant services, investments, and insurance services.
Credit Union: 4 out of 5
The monthly fees charged by credit unions range from $0 to $20. Many credit unions offer free checking accounts with no minimum balance requirements, but some charge fees for certain types of business checking accounts.
Bank: 3 out of 5
Meanwhile, banks can charge monthly fees as high as $35 to $40. Since banks are structured to earn profits, they typically have more (and higher) fees in comparison to credit unions. However, some banks offer free business checking accounts.
See our list of the best free business checking accounts for more details.
Credit Union: 3 out of 5
Each credit union member is covered up to $250K by the National Credit Union Administration (NCUA).
Bank: 5 out of 5
Clients are covered by FDIC insurance up to $250K, but some banks can offer as high as $150 million through their partner banks and their sweep network, where customer deposits are spread out to several banks for extended fund protection.
Read more about FDIC Insurance for business accounts and how it works.
Credit Union: 4 out of 5
Credit unions have a limited number of branches available. Most of them are part of a network that allows access to shared branches and ATMs nationwide.
Bank: 5 out of 5
Big traditional banks have several brick-and-mortar branches and large ATM networks available nationwide, while online-only banks don’t have physical branches; though they offer access to the largest ATM networks.
Learn more about what online banking is and how it works.
Credit Union: 4 out of 5
Credit unions typically offer higher APYs on deposits and lower interest rates on loans since they’re nonprofit institutions.
Bank: 4 out of 5
Traditional banks generally offer lower APYs on deposits and higher interest rates on loans, although online-only banks may offer higher deposit rates and lower loan rates since their operational expenses tend to be fewer than traditional banks.
Check out our comparison of online vs traditional banking to learn more about their differences and advantages.
Credit Union: 3 out of 5
Credit unions have access to advanced technology and deliver an online banking experience—but the functions may be limited. Although rare, some credit unions also provide seamless digital and mobile banking options.
Bank: 4 out of 5
Traditional banks and online-only banks have more advanced online and mobile platforms than credit unions, especially bigger banks with higher budgets for technology. Both provide a superb online banking experience with more technical upgrades and functions and features for online banking services.
Credit Union: 3 out of 5
Credit unions can only open financial accounts for members. As they’re owned by members, they can vote on policies of the credit unions and have a voice in decision-making.
Bank: 5 out of 5
Banks don’t require membership to open an account, and anyone is eligible to open one. Your only restriction in opening a business bank account may be the geographic location of your company. Some banks, like U.S. Bank and Huntington, require you to operate in a specific state to open an account. In general, investors own the bank, while the customers can’t dictate how it’s operated.
Benefits & Drawbacks of Credit Unions vs Banks for Businesses
Financial Institution | Benefits | Drawbacks |
|---|---|---|
Credit Union |
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Bank |
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Factors Businesses Should Consider Before Choosing a Credit Union or a Bank
- Accessibility: Is your business located near a credit union or bank branch? Will you be needing in-person banking often?
- Financial products and services: What types of products and services fit your business needs?
- Fees: Do you use an ATM card often? If yes, check the ATM fees of the bank or credit union you’re choosing. Some don’t charge ATM fees, while others offer rebates.
- Interest rates: Are you looking to apply for loans? Loan interest rates are lower at credit unions than at banks. Are you seeking to earn higher APYs? Credit unions offer higher deposit interest rates but online banks also provide competitive rates.
- Membership requirements: Are you open to signing up as a member of a credit union or do you prefer the convenience of opening an account with a bank?
Key Statistics Comparing Banks vs Credit Unions
FDIC-insured Banks | Federally Insured Credit Unions | |||
|---|---|---|---|---|
December 2021 (Q4)* | December 2022 (Q4)* | December 2021 (Q4)* | December 2022 (Q4)* | |
Number of Banks/Credit Unions | 4,839 | 4,706 | 4,942 | 4,760 |
Total Assets** | $23,720 | $23,600 | $2,060.40 | $2,167.90 |
Total Loans** | $11,247 | $12,227 | $1,255.20 | $1,506.60 |
Net Income** | $63.862 | $68.410 | $20.80 | $18.90 |
*Q4 is fourth quarter
**Dollar amounts in billions
- The number of FDIC-insured banks in the fourth quarter of 2022 is now at 4,706, a slight decline from the previous year’s 4,839.
- Similar to banks, the number of federally insured credit unions also declined from 4,942 in the fourth quarter of 2021 down to 4,760 in the same quarter of 2022.
- Total assets in FDIC-insured banks have declined by $120 billion, or 0.51%.
- Total assets in federally insured credit unions increased by $107.50 billion, or 5.2%.
- Total loans in FDIC-insured banks increased by $980 billion, or 8.7%.
- Total loans in federally insured credit unions increased by $251.40 billion, or 20%.
- The net income of FDIC-insured banks has increased to $68.410 billion compared to the previous year’s fourth-quarter net income of $63.862 billion, a difference of $4.5 billion or 7%.
- The net income of federally insured credit unions has reduced from $20.80 billion in the fourth quarter of 2021 down to $18.90 billion in the fourth quarter of 2022, a difference of $1.9 billion or 9.1%.
Frequently Asked Questions (FAQs)
Money in a bank is safer than in a credit union since banks offer sweep programs that allow you to insure your business funds beyond the FDIC limit of $250,000. However, if you’re mindful of the $250,000 FDIC and NCUA limit, your money would be equally protected in either a bank or a credit union.
With credit unions, business owners can obtain lower fees, high deposit interest rates, and lower interest rates on loans compared to banks. They also provide more personalized customer service to their members. Further, the members can benefit from easy loan approval and participate in policies and decision-making on how to run the credit union.
Credit unions offer limited convenience due to fewer ATM and branch networks and less advanced technology compared to banks, especially involving mobile banking. Also, their financial products and services aren’t as extensive compared to banks.
Banks aren’t necessarily better than credit unions. Both offer benefits and drawbacks so choosing one over the other depends on your business needs and what you value. You may want to consider different factors before deciding, such as accessibility, types of financial products and services offered, fees, interest rates, and membership requirements.
Bottom Line
When deciding whether a credit union vs a bank is right for your business, it’s important to consider your business banking needs and priorities. You may want to 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 a wide array of banking products and services, then working with a bank may be the better option.
If you decide to pick a bank vs credit union for a business account, read our guide on how to choose a bank for your small business to ensure the bank you select is the right fit.
