Lesson P101.13 · Personal Finance 101: Get Control
Credit union or bank: what's the difference
5-minute read · Figures checked October 2026
Photo: Andrea Piacquadio / Pexels, Pexels License
The short answer
Both take deposits and make loans. A credit union is a not-for-profit cooperative owned by its members, and you join through a group it serves. A bank is owned by its shareholders. At a federally insured bank or credit union, your deposits are insured up to $250,000 per owner, per institution, per ownership category: by the FDIC at banks and the NCUA at credit unions.
Who owns it
| Credit union | Bank | |
|---|---|---|
| Owned by | Its members | Its shareholders |
| Deposit insurance | NCUA, if the credit union is federally insured | FDIC, if the bank is FDIC-insured |
| Look it up with | The NCUA's Credit Union Locator | The FDIC's BankFind Suite |
The National Credit Union Administration (NCUA) says: "Credit unions are owned and controlled by their members." All credit unions are not-for-profit, and the members elect a volunteer board of directors to manage them. At a federal credit union, each member has one vote, no matter how many shares the member owns. The NCUA also says that, unlike banks, credit unions return surplus income to their members in the form of dividends, and that profits come back as reduced fees, higher savings rates and lower loan rates.
On the bank side, the NCUA puts the difference this way: a credit union member owns a share of the credit union, which "differs from a bank, which is owned by its shareholders, not its customers."
The NCUA also says that, on average, credit unions offer higher savings rates and lower loan rates. An average doesn't pick your account. Compare the actual fee schedule and rates at the places you'd use, with the 10-question checklist in lesson P101.4.
Deposit insurance: same limit, different insurer
- Banks. FDIC deposit insurance covers $250,000 per depositor, per FDIC-insured bank, for each account ownership category. It's backed by the full faith and credit of the United States government.
- Credit unions. The National Credit Union Share Insurance Fund covers $250,000 per share owner, per insured credit union, for each account ownership category. It's also backed by the full faith and credit of the United States, and it insures all federal credit unions and the vast majority of state-chartered ones.
- The exception. Some state-chartered credit unions are insured by private insurers instead. That coverage isn't backed by the full faith and credit of the United States government. Federally insured credit unions must display the official NCUA sign at each teller station. If you're not sure, look the credit union up.
- What isn't covered at either. Deposit insurance doesn't cover stocks, bonds, mutual funds, annuities, life insurance policies or safe deposit boxes, even when they're sold at a bank or credit union. The FDIC adds crypto assets to that list.
Joining a credit union
To use a credit union, you have to be part of a group that's allowed to join it. The NCUA calls that common bond the credit union's field of membership. Some ways people qualify:
- Many employers sponsor their own credit unions.
- Many credit unions serve anyone who lives, works, worships or attends school in a particular area.
- Belonging to a group, such as a place of worship, a school, a labor union or a homeowners' association, may qualify you.
- Most credit unions let members' families join.
Look it up before you open an account
- Bank: the FDIC's BankFind Suite tells you whether a bank is FDIC-insured, where its branches are and its history.
- Credit union: the NCUA's Credit Union Locator searches by address, name or charter number and shows the services and location of each credit union. Use it to check whether a credit union is federally insured.
Your Move
Do this week
- Look up the bank or credit union you use now: BankFind for a bank, the NCUA Credit Union Locator for a credit union. Confirm it's federally insured.
- List the groups you belong to: your employer, your union, your place of worship, your school, the town where you live or work.
- Find one credit union near you and check whether one of those groups puts you in its field of membership.
- Compare its fee schedule with your current account, using the 10 questions in lesson P101.4.
Log it: Deposit insurance confirmed.
Common questions
Is my money as safe at a credit union as at a bank?
At a federally insured credit union, yes on the coverage: $250,000 per share owner, per insured credit union, per ownership category, backed by the full faith and credit of the United States, the same limit the FDIC uses at banks.
Can anyone join a credit union?
You have to be part of a group the credit union is allowed to serve. Many serve everyone who lives, works, worships or attends school in an area, and most let members' families join.
Are credit unions cheaper?
The NCUA says that, on average, they offer higher savings rates and lower loan rates. Averages vary by place, so compare the fee schedules and rates of the accounts you'd actually use.
Watch out for
- A state-chartered credit union with private deposit insurance. That coverage isn't backed by the U.S. government. Look for the NCUA sign or check the locator.
- Investments sold at a branch. Stocks, bonds, mutual funds and annuities aren't deposits and aren't insured, even inside a bank or credit union.
- More than $250,000 in one ownership category at one institution. Coverage stops at the limit.
Free help
Free practice
Lesson check
5 questions on this lesson, one at a time, with the answer and the reason after each. Pass with 4 right, including every must-know question.
This is general education, not tax, legal, investment or insurance advice. Rules change and every situation is different. Check the sources below, and talk to a qualified professional before you act on it.
Sources
- NCUA, MyCreditUnion.gov: What is a credit union? (checked October 11, 2026)
- NCUA, MyCreditUnion.gov: How is a credit union different than a bank? (checked October 11, 2026)
- NCUA, MyCreditUnion.gov: Share insurance (checked October 11, 2026)
- NCUA: Chartering and Field of Membership Manual, overview of federal credit unions (checked October 11, 2026)
- NCUA: Minority Depository Institutions report to Congress, 2021, glossary (checked October 11, 2026)
- NCUA: Consumers: Credit Union Locator (checked October 11, 2026)
- FDIC: Understanding deposit insurance (checked October 11, 2026)
- FDIC: Data tools, BankFind Suite (checked October 11, 2026)
- Consumer Financial Protection Bureau: Activity guide on banks and credit unions (PDF) (checked October 11, 2026)