Shoestring Living: Banks vs. credit unions

Molly Logan Anderson

Deciding whether to invest your money in a large bank or a local credit union bears a resemblance to selecting which college you'll attend. Will you be a small fish in a large pond, or a large fish in a small pond? Are your goals in line with what the institution offers? Cost is a consideration as well. And which one allows you to reach your goals efficiently?

Funnily enough, these questions work for either scenario. If you’re in the market to open an account, or transfer funds from an existing one, look no further. Here’s everything you need to know about banks and credit unions to make the best possible financial decision.

Show me the money

The most notable difference between banks and credit unions is that banks are for-profit, while credit unions are not-for-profit. The programs and plans offered by your local bank are developed with one thing in mind:  making money for shareholders. Conversely, credit unions operate in the interest of their members, and it’s the members that benefit when the credit union makes money.

Who’s running the show?

A paid board of directors manages a bank and makes all profit-driven decisions for the bank and its customers. Account holders hail from anywhere in the United States. A credit union is established to serve a particular area of group, not just anyone from anywhere. Member-elected boards make decisions, and their primary concern is to make member-directed plans.

What’s in it for me?

While it used to be that small credit unions couldn’t compete with the programs and services offered by big banks, times have changed. For the most part, credit union members can now find similar programs for online bill pay, child and teen banking, even special savings accounts for prom or holiday savings. On the flipside, the locations of credit unions, compared to a national multi-branch banking institution, may be limiting in terms of monetary access.


It all boils down to dollars and cents, doesn’t it? According to the Credit Union National Association, loans through credit unions have lower average interest rates than banks across the board, while credit unions boast higher savings-related interest rates. 

Molly Logan Anderson is a freelance writer who lives in the western suburbs of Chicago with her husband, Mike, three kids and two labs. Join Molly on her family’s journey of living a frugal life and making financial freedom their reality in her columns or visit her website at