What is a credit union?
A credit union is a not-for-profit financial cooperative owned by its members. Members pool deposits to lend to one another, and because there are no outside shareholders, any surplus is returned as higher savings rates, lower loan rates and lower fees - which is why the NCUA's national averages show credit unions beating banks on most products. To bank there you must be within the credit union's field of membership, and your deposits are federally insured up to $250,000. This is general information, not financial advice.
Source: NCUA Credit Union and Bank Rates. Data as of December 26, 2025.
How a credit union works
When you open an account at a credit union you become a part-owner, not just a customer. Your deposit buys a "share" in the cooperative, which is why a savings account is called a share account and a CD is called a share certificate. Members elect a volunteer board of directors. Profits are not paid out to investors; instead they fund better pricing for members or are held as reserves.
Credit union vs bank at a glance
| Feature | Credit union | Bank |
|---|---|---|
| Ownership | Members (cooperative) | Shareholders (for-profit) |
| Goal | Serve members | Maximize profit |
| Who can join | Field of membership | Generally anyone |
| Deposit insurance | NCUSIF, $250,000 per member | FDIC, $250,000 per depositor |
| Average deposit rates | Higher (money market, CDs) | Lower |
| Average loan rates | Lower (auto, cards, mortgages) | Higher |
| Branch / ATM network | Often smaller, but shared-branch networks help | Often larger |
Why credit unions often have better rates
The structural difference is the whole story: with no outside shareholders demanding a return, a credit union can run on thinner margins and pass the difference to members. Across the latest NCUA report, credit unions pay a higher average rate on money market accounts and every CD term, and charge a lower average rate on auto loans, credit cards, mortgages, home equity and personal loans. See the full credit union vs bank rate tables.
The catch: eligibility and scale
Credit unions can only serve their field of membership, and many are smaller than national banks, with fewer branches and sometimes less polished apps. Shared-branch and surcharge-free ATM networks close much of that gap. Read the full credit union vs bank pros and cons.
Frequently asked questions
What is a credit union in simple terms?
A credit union is a not-for-profit financial cooperative owned by the people who bank there. Members pool their savings to lend to one another. Because there are no outside shareholders to pay, surplus is returned to members as higher savings rates, lower loan rates and lower fees.
Are credit unions safe?
Yes. Deposits at federally insured credit unions are protected by the NCUA Share Insurance Fund up to $250,000 per member, per ownership category - the same coverage limit as FDIC insurance at banks, backed by the full faith and credit of the United States.
What is the difference between a credit union and a bank?
A bank is a for-profit company owned by shareholders; a credit union is a not-for-profit cooperative owned by its members. Anyone can usually open a bank account, while a credit union can only serve people in its field of membership. On average credit unions pay more on deposits and charge less on loans.
Sources & accuracy
Structure and insurance from the NCUA Share Insurance Fund (NCUSIF); rate generalizations from the NCUA Credit Union and Bank Rates report. General information, not financial advice. See methodology and disclaimer.
Last updated: 2026-06-22