Credit union vs bank: what sets them apart
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Key takeaways
A credit union is a member-owned, not-for-profit financial cooperative, while a bank is a for-profit institution owned by shareholders.
Credit unions often have more flexible account opening requirements and lower fees, but membership eligibility can be limited by location, employer, or community.
Banks generally offer broader branch and ATM networks and a wider range of products.
Both credit unions and banks are typically covered by federal deposit insurance up to applicable limits.
Comparing account opening requirements at a credit union can be worthwhile for newcomers who don’t yet have an extensive financial history.
Most people searching for “credit union vs bank” want to know one thing: which one should hold their money. Credit unions and banks both offer checking accounts, savings accounts, and loans, but they’re structured differently in ways that affect fees, eligibility, and the range of services available. Here’s what sets them apart, and why it matters for anyone new to the U.S. financial system.
What is a credit union?
A credit union is a not-for-profit financial cooperative that’s owned by its members rather than by outside shareholders. Because credit unions don’t need to generate profit for shareholders, they often pass savings on to members in the form of lower fees and more competitive interest rates on savings and loans. Membership is usually limited to people who meet certain criteria, such as living in a specific area, working for a particular employer, or belonging to an associated community group.
Credit union vs bank: key differences
Credit union | Bank | |
|---|---|---|
Ownership structure | Owned by members; not-for-profit | Owned by shareholders; for-profit |
Eligibility | Membership often limited by location, employer, or community | Generally open to anyone who meets identification requirements |
Fees | Often lower monthly fees and account minimums | Fees vary widely; larger banks may charge more |
Interest rates | Often more competitive rates on savings and loans | Rates vary by institution and account type |
International transfer support | Varies by credit union; some offer limited services | Typically offers a fuller range of international transfer options |
Both types of institutions are typically insured, credit unions through the National Credit Union Administration(opens in new window) and banks through the FDIC(opens in new window), so deposits are protected up to applicable limits in either case.
Why the difference matters for newcomers
For someone new to the country, a credit union can sometimes offer a more accessible path to opening a bank account(opens in new window), since many credit unions have historically served specific communities with fewer barriers to entry. Some credit unions are also known for being more willing to work with limited credit history when considering a loan application.
At the same time, banks, particularly larger national ones, often offer broader branch networks, more extensive online and mobile banking features, and a wider range of products, including more established international transfer services built into their apps.
Neither option is inherently better. The right choice depends on:
Whether membership eligibility is met at a credit union in a specific area
How important a wide branch or ATM network is to daily banking needs
Whether the account is primarily for domestic banking or also expected to support broader in-branch international transfer options
Credit unions, banks, and international money transfers
Whether choosing a credit union or a bank, the account itself works the same way for the purpose of sending or receiving an international transfer: an account and routing number are needed to fund a transfer from a checking account, and either type of institution can typically receive an incoming bank deposit transfer from abroad.
Where the two can differ is in built-in international transfer features. Larger banks are more likely to offer international wire transfers directly through their own app or branch network, while credit unions may have more limited in-house international transfer options. This doesn’t affect the ability to use a separate money transfer service(opens in new window) since it usually connects to whichever bank account is provided, regardless of whether it’s a credit union or a bank. For anyone specifically researching credit unions in a small business context, a closer look at credit unions versus banks for small business banking(opens in new window) covers many of these same ownership and eligibility differences from that angle.
If deciding where to open an account specifically to support regular remittances, it may be worth asking a credit union directly about any restrictions on linking outside transfer apps or on international incoming deposits, since policies can vary more between individual credit unions than between large national banks.
Membership requirements can vary meaningfully
Unlike a bank, a credit union generally requires membership, often based on where someone lives, works, or a specific affiliation like military service or an employer relationship. Some credit unions have broadened their membership criteria considerably in recent years, so it’s worth checking eligibility directly rather than assuming a specific credit union is out of reach.
Why credit unions sometimes offer better rates
Because credit unions are member-owned, not-for-profit organizations, they often return profits to members through better interest rates on savings and lower rates on loans, compared with a traditional for-profit bank. This structural difference is part of why comparing both options, rather than assuming a bank is automatically the more full-featured choice, can be worthwhile.
Common questions about credit unions
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Is my money safer in a bank than a credit union?
Not necessarily. Deposits at federally insured credit unions are protected by the NCUA up to applicable limits, similar to how the FDIC protects deposits at insured banks. The safety of a deposit generally depends on whether the institution is federally insured, not whether it’s structured as a credit union or a bank.
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How do I know if I’m eligible to join a credit union?
Eligibility rules vary by credit union and are often based on factors like where someone lives, works, worships, or attends school, or whether a family member is already a member. Many credit unions list their specific eligibility requirements on their website, so it’s worth checking before assuming eligibility doesn’t apply.
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Can I use a credit union account to send money with Remitly?
Yes. Remitly connects to a bank account using standard account and routing number details, regardless of whether the account is held at a credit union or a bank. The transfer process works the same way either way.
In Summary
Credit unions and banks both offer a safe place to hold money, but they differ in ownership structure, fees, and eligibility. Credit unions can be a more accessible option for newcomers building a first U.S. banking relationship, while banks often provide broader networks and more built-in features. Whichever is chosen, the account works the same way when it comes to sending or receiving money internationally.
This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.