What are the advantages of a credit union?
Key Takeaways
Credit unions often offer substantially higher interest rates on savings and deposits.
Credit unions also often offer loans and mortgages at rates significantly lower than most banks.
In most cases, credit unions have a lower entry barrier for giving credit to people.
Credit unions are a system of not-for-profit, community-based banking cooperatives built around the idea of promoting sound financial practices and the well-being of their members. They offer the same financial products and services as banks but differ from their corporate counterparts in their basic setup and objectives.
Unlike banks that are owned and operated by shareholders, credit unions are collectively owned by their customers, who are referred to as members. Another point of difference between the two is that credit unions redistribute their profits to their member-customers as “dividends,” while banks pay “interest” to their customers.
These structural differences are also reflected in the naming of financial products. The equivalent of a bank savings account in a credit union is called a “share account” — a reference to the customer’s ownership or “share” of the credit union. Current accounts, likewise, are called “share draft accounts.”
What are the advantages of a credit union?
Although their numbers have been falling in recent years, credit unions remain incredibly popular among Americans. At the end of 2021, there were more federally insured credit unions in the US than federally insured banks. Part of their attraction is because credit unions are founded on cooperative principles.
Let’s explore some of the benefits and privileges that come with being a member of a credit union:
- Higher rates on savings and deposits: Because credit unions are not beholden to shareholders, they are free to share their profits with members in the form of higher dividends on savings and deposit accounts, along with other benefits. Credit unions offer some of the best returns on share accounts, high-yield savings accounts (HYSAs), and certificates of deposit (CDs). For instance, the average credit union interest rate on a 5-year, $10,000 CD was 2.89% in the third quarter of 2024. The corresponding average bank rate was 1.35%.
- Affordable borrowing costs: Their not-for-profit structure allows credit unions to offer some of the lowest rates on credit products such as mortgages, credit cards, and vehicle loans. In the third quarter of 2024, the average interest rate on a classic bank credit card was multiple percentage points higher than what credit unions were offering. Similarly, a 48-month used car loan that you could secure from a credit union for 6.34% interest would cost you 7.80% at a bank. Beyond lower rates, credit unions are also willing to provide loans for small businesses and borrowers-in-need that are typically overlooked by banks.
- Lower entry bar for credit: Banks might refuse loans to people with a bad credit history or those without a credit history. Credit unions, on the other hand, typically have far more forgiving qualification standards for loans and mortgages. Because of their community-oriented philosophy, they are more likely to offer loans to people in financial trouble and offer reduced down payments.
- Beyond-banking benefits: True to their roots as cooperative institutions, credit unions take it upon themselves to promote financial inclusion and education by helping members learn about money matters and responsibilities. These efforts usually take the shape of workshops and free financial advice designed to enrich local communities. Some credit unions go beyond financial outreach programs to focus on local issues and social causes surrounding women, children, and at-risk groups
Things to consider before joining a credit union
If you’re unhappy with your current bank or tired of paying service fees, a credit union can be a welcome alternative. However, they are not for everyone and certainly not for every kind of financial need. Credit unions come with their own set of challenges and disadvantages.
Here are a few things to consider before signing up with a credit union:
- Limited locations: Credit unions come in various sizes and some of the smaller ones have just a few brick-and-mortar branches spread across a particular state or county. Conducting in-person business may prove difficult if you live far away from available branches.
- Fewer ATMs: Many credit unions often have just a single ATM attached to their branches or a handful of standalone ATMs but they are spread out few and far between. That means you may occasionally have to rely on ATMs operated by other banks and pay a fee per transaction, if applicable.
- Low technology: If you’re used to snazzy banking apps and high-speed online services, some credit unions might prove disappointing. Because they are smaller in size and resources than traditional banks, credit unions often cannot compete in terms of investing in the latest technology.
- Limited credit card options: Credit unions do offer credit cards at comparatively lower rates of interest, but lack the variety of options offered when compared to most banks. You’re unlikely to find credit cards with attractive sign-up bonuses or reward programs at most credit unions.
- Membership hurdles: Some credit unions cater exclusively to specific communities, professions, and locations. Some will sign you on as a member only if you live within a particular geographical area. Others require their members to be employees of the state they operate in.
Make the most out of credit union opportunities
With so many factors to consider, picking a credit union that is just right for your needs can be challenging. Raisin is here to help you with the process.
We are an online savings marketplace offering a wide range of financial products from credit unions across the country. Best of all, as a Raisin customer you are generally able to obtain credit union membership without any associated fees or donations. Plus, you have the convenience of operating multiple savings and financial products with a single login.
Join Raisin today for the best credit union experience.
The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.
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*APY means Annual Percentage Yield. APY is accurate as of April 10, 2026. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.
Raisin is not an FDIC-insured bank, and FDIC deposit insurance only covers the failure of an insured bank.
Raisin is not an NCUA-insured credit union. NCUA deposit insurance only covers the failure of an insured credit union.
Raisin does not hold any customer funds. Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through Raisin.com. The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered by the applicable bank or credit union through Raisin.com. Each customer also authorizes the Service Bank to move funds among the various banks and credit unions at the customer’s request. First International Bank & Trust (FIBT), Member FDIC, is the Service Bank. Bell Bank and Starion Bank, each Member FDIC, are the Custodial Banks.
†Based on $250,000 in FDIC or NCUA insurance coverage per insurable category of ownership at each partner bank or credit union on the Raisin platform (each a "Product Bank"), when aggregated with all other deposits held by you at such Product Bank and in the same insurable category. Deposits made through Raisin will be eligible to receive deposit insurance from the FDIC or the NCUA (each a "Deposit Insurer") in accordance with and up to the maximum amount permitted by law at each Product Bank. Raisin is not a bank or credit union and does not hold any customer funds. Funds are held at FDIC-insured banks and NCUA-insured credit unions. Deposit insurance covers the failure of an insured bank or credit union. Certain conditions must be satisfied for pass through deposit insurance coverage to apply. Customers may choose to deposit funds with identically registered accounts at different Product Banks on the Raisin platform to be eligible for Deposit Insurer coverage up to $10 million for individual accounts and $20 million for joint accounts when at least 40 Product Banks are utilized. Please be aware, however, that any deposits you have at a Product Bank, whether through the Raisin platform or outside the Raisin platform, that you may hold in the same capacity (such as in an individual capacity or joint capacity) count toward the applicable Deposit Insurer's deposit insurance maximum amount, and any such amounts that you hold in the same capacity at a Product Bank that exceed the maximum insurance coverage by the applicable Deposit Insurer will not be insured. For more information on FDIC deposit insurance, please see here. For more information on the NCUA share insurance fund, please see here. You are solely responsible for monitoring the amount of funds you have on deposit at each a Product Bank, whether through the Raisin platform or outside the Raisin platform, to confirm that the deposits you hold in the same capacity at each Product Bank do not exceed the maximum deposit insurance coverage provided by the applicable Deposit Insurer.