Credit unions can be good places to save, but they work differently than banks and suit different people
A credit union is a nonprofit organization owned by its members — the people who bank there. Instead of making profit for shareholders, a credit union returns earnings to members through better interest rates on savings, lower fees, and lower loan rates. This structure means a credit union savings account often pays more interest than a bank savings account, and you will not pay monthly maintenance fees that eat into your balance.
The catch is that credit unions are smaller than banks and have fewer branches and ATMs. You also have to become a member to open an account, which usually means meeting a membership requirement — living in a certain area, working for a certain employer, or belonging to a certain group. If you can meet that requirement and you do not need a branch on every corner, a credit union savings account can be a solid choice.
Key Takeaways
- Credit unions typically pay higher interest on savings accounts than banks do, because they are nonprofits that return earnings to members rather than shareholders.
- You must meet a membership requirement to open a credit union account — usually based on where you live, where you work, or a group you belong to.
- Credit unions have fewer branches and ATMs than banks, so you need to check whether one is convenient to you before joining.
- Credit union savings accounts usually have no monthly maintenance fees, which means more of your money stays in the account to earn interest.
- Your deposits are insured the same way at a credit union as at a bank — up to $250,000 through the National Credit Union Administration (NCUA).
How credit union interest rates compare to bank rates
Credit unions typically offer higher interest rates on savings accounts than traditional banks. The exact rate varies by credit union and changes over time, but you will often see credit union savings accounts paying two to four times what a bank savings account pays. This difference adds up: on a $5,000 balance, a 0.01% bank rate earns you about 50 cents per year, while a 0.50% credit union rate earns you about $25 per year.
The reason is structural. A bank is a for-profit business that keeps most of its earnings. A credit union is a nonprofit that must return earnings to members. That means credit unions can afford to pay you more interest because they are not paying dividends to outside investors. The tradeoff is that credit unions are usually smaller and have less money to lend, which is why they cannot offer the same range of products a large bank can.
Interest rates at both banks and credit unions change based on what the Federal Reserve does with interest rates. When the Fed raises rates, both banks and credit unions raise the rates they pay on savings. When the Fed lowers rates, both go down. But the credit union will usually stay ahead because of that nonprofit structure.
Membership requirements and how to join
Before you can open a savings account at a credit union, you have to become a member. Membership requirements vary widely. Some credit unions serve everyone in a geographic area — for example, anyone who lives in a certain county. Others serve employees of a specific company, members of a specific profession, or people who belong to a specific organization like a union, church, or alumni association.
To find a credit union you can join, start by searching the CO-OP Network or Shared Branch network websites, which let you search by location or employer. You can also ask your employer whether they sponsor a credit union, or search for credit unions in your area and call to ask about membership. Once you find one that accepts you, the joining process is straightforward — you fill out a membership form and open your savings account at the same time. There is usually no fee to join.
Some credit unions require you to keep a small minimum balance in a savings account to stay a member — often $5 to $25. This is much lower than the minimums some banks require to avoid monthly fees, so it is rarely a barrier.
Fees and what you will actually pay
Credit union savings accounts almost never charge monthly maintenance fees. This is one of their biggest advantages over banks, many of which charge $5 to $15 per month to keep a savings account open. Over a year, that fee can cost you $60 to $180 — money that could have been earning interest instead.
You may pay fees at a credit union for other things: overdrafts on a checking account, wire transfers, or stopping a payment. But for a basic savings account, you should expect to pay nothing. If a credit union quotes you a monthly fee for a savings account, that is unusual and worth comparing to other options.
One place credit unions do charge is ATM access. Because credit unions are small, they cannot afford to put ATMs everywhere. If you withdraw cash frequently, check whether the credit union is part of a shared branching network or ATM network that gives you access to other credit unions' machines. Some credit unions reimburse you for out-of-network ATM fees, but not all do.
Convenience: branches, ATMs, and online banking
A credit union will have fewer physical branches than a bank. A large national bank might have thousands of branches; a credit union might have five to twenty. This matters if you like to do business in person, deposit checks at a branch, or withdraw cash from an ATM near your home or work.
To make up for this, most credit unions belong to shared branching networks. This means you can walk into another credit union that is part of the same network and do basic transactions — deposits, withdrawals, account inquiries — even though it is not your credit union. The CO-OP Network and Shared Branch are the two largest networks. Before you join a credit union, check whether it belongs to one of these networks and whether there are branches near you.
All credit unions now offer online banking and mobile apps, so you can check your balance, transfer money, and deposit checks by phone from anywhere. The apps are usually simpler than bank apps because credit unions offer fewer products, but they work well for basic savings account tasks. If you do most of your banking online, the lack of physical branches matters much less.
Safety of your money and deposit insurance
Your deposits at a credit union are insured by the National Credit Union Administration (NCUA), a federal agency that works the same way the FDIC does for banks. The NCUA insures deposits up to $250,000 per account holder per credit union. This means if the credit union fails, you will get your money back up to that limit.
In practice, credit union failures are rare. The NCUA has a fund that backs all member credit unions, and credit unions are regulated to keep them safe. You should feel as confident about the safety of your money at a credit union as you would at a bank.
One thing to watch: if you have accounts at multiple credit unions, each one is insured separately up to $250,000. But if you have multiple accounts at the same credit union — say, a savings account and a money market account — they are added together and insured as one account. If you are saving more than $250,000, you would need accounts at different credit unions to insure all of it.
When a credit union savings account makes sense for you
A credit union is a good choice if you can meet the membership requirement, you do not need a branch on every corner, and you want to earn more interest on your savings with no monthly fees. This works especially well if you are saving for a goal that will take months or years — the higher interest rate compounds over time and adds real money to your balance.
A credit union is less ideal if you travel frequently and need ATM access everywhere, if you need to deposit cash at a branch multiple times a week, or if you want a wide range of financial products like investment accounts or complex loan options. In those cases, a large bank or an online bank might serve you better.
You can also have accounts at both a credit union and a bank. Many people keep a credit union savings account for long-term saving and a bank checking account for everyday spending because the bank has more convenient branches or ATMs. There is no rule against it, and it lets you get the benefits of both.
Frequently Asked Questions
Can I use a credit union ATM if I do not belong to that credit union?
Yes, if both credit unions are part of the same network. The two largest networks are CO-OP and Shared Branch. You can use any ATM in the network, though some networks charge a small fee for out-of-network withdrawals. Check your credit union's website to see which network it belongs to and whether it reimburses fees.
What happens to my money if the credit union goes out of business?
The NCUA insures your deposits up to $250,000, just like the FDIC does for banks. If the credit union fails, you will receive your insured balance. Credit union failures are rare because the NCUA regulates credit unions to keep them stable and maintains a fund to back them.
Do I have to keep a minimum balance in a credit union savings account?
Most credit unions require a small minimum balance to stay a member — often $5 to $25 — but this is much lower than what many banks require to avoid monthly fees. Some credit unions have no minimum at all. Ask the credit union before you join.
Can I open a credit union account online, or do I have to go to a branch?
Some credit unions let you open an account online, but many still require you to visit a branch in person or mail in a membership form. Call the credit union or check their website to find out. If you cannot visit a branch, look for a credit union that offers online account opening.
Is the interest rate at a credit union locked in, or can it change?
Interest rates at credit unions change over time, just like at banks. The rate you see today may be different next month. However, the rate on money already in your account will not drop without notice — the credit union must tell you about rate changes. Check your statements or the credit union's website to see current rates.