Which is Better – a Bank or a Credit Union?

There are pros and cons to both banks and credit unions. It really depends on your personal financial situation and what you’re looking for in a financial institution. Here’s a quick rundown of the differences between banks and credit unions to help you make the best decision for your needs.

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Banking in the United States began in the late 1700s with the founding of the First Bank of the United States. This bank was created by the US Government in order to establish a standard currency and regulate banking practices. Soon after, other banks began to pop up all over the country. In the early 1900s, there were about 5,000 banks in the US.

Origins of banks

Banking in its modern form began in medieval Italy, with the development of money markets and merchant banks. However, the roots of banking can be traced back much further, to ancient Mesopotamia and beyond.

The origins of banking are closely tied to the origins of money. Money is thought to have first emerged in the form of commodity money, which is money that has value because of the commodity it is made from. The first known use of commodity money was in Mesopotamia around 3000 BCE. At this time, people used barley as a form of currency.

Banking began to develop out of the need to store and lend this commodity money. The first banks were probably created by temples, which served as both places of worship and centers of trade. These temples would collect barley from farmers as a form of tax, and then loan it out to merchants at interest.

Over time, banks began to emerge as standalone institutions, separate from temples. The first recorded bank was created in ancient Greece around 700 BCE. This bank was called the Temple Bank of Delos and it was used to finance maritime trade.

The Romans also developed early banking systems. The most famous Roman bank was the Temple Bank of Jupiter, which was located on the Capitoline Hill in Rome. This bank was responsible for financing many public works projects, including the construction of roads and aqueducts.

Banking continued to develop through medieval times. During this period, European monarchs began to establish state-sponsored banks, such as the Bank of Venice (established in 1157) and the Bank of Genoa (established in 1407). These banks were typically created for purposes such as financing wars or funding other royal projects.

Origins of credit unions

Credit unions began in Germany in the mid-19th century as a way for workers to pool their resources and lend money to each other at low interest rates. The first credit union in the United States was founded in Manchester, New Hampshire, in 1908.

In the years following the Great Depression, credit unions flourished as a way for working people to save and borrow money without having to rely on banks. But by the 1970s, credit unions were facing stiff competition from banks and other financial institutions.

In order to stay competitive, many credit unions began offering services such as checking and savings accounts, ATM access, and even credit cards. Today, there are more than 9,000 credit unions in the United States with more than 100 million members.


Banks are typically big businesses while credit unions are smaller, meaning that credit unions often have a more personal touch. This can be beneficial if you prefer working with people one-on-one rather than through an impersonal institution. When it comes to account options, banks typically offer more choices than credit unions. You may find that banks offer more products and services than credit unions, giving you more choices for your financial needs.

How banks are organized

Banks are typically organized into three tiers: investment banks, commercial banks, and central banks. Investment banks are the largest and most well-known tier, which includes firms such as Goldman Sachs and Morgan Stanley. These banks advise and underwrite new securities issues and also trade in securities for their own account. Commercial banks, such as JPMorgan Chase and Bank of America, take deposits from businesses and consumers and make loans to businesses. Central banks, such as the Federal Reserve in the United States, oversee the banking system and implement monetary policy.

How credit unions are organized

A credit union is a member-owned, not-for-profit financial cooperative. Unlike banks, which are owned by shareholders and motivated by profits, credit unions serve their members and are governed by a volunteer Board of Directors elected by the membership.

All income generated by a credit union is returned to the members in the form of lower loan rates, higher interest on deposits, and improved services. As member-owned cooperatives, credit unions exist to serve their members, not to make a profit.

While most credit unions are state chartered, there is a national credit union system in the United States that is overseen by the National Credit Union Administration (NCUA), a federal government agency. Each state also has its own credit union regulator.


When it comes to whether you should choose a bank or a credit union, it really depends on what services you are looking for. If you are looking for a full-service bank that offers things like investment services and wealth management, then a bank is probably the better option for you. However, if you are just looking for a place to deposit your money and get a loan when you need one, then a credit union might be the better option.

What banks offer

Banks offer a wide array of services to their customers, from savings and checking accounts to loans and lines of credit. In addition, banks provide a safe place to store your money and can offer advice on financial planning and investment options.

There are two main types of banks: commercial banks and investment banks. Commercial banks are the more common type and include big names like JPMorgan Chase, Bank of America, and Wells Fargo. Investment banks are typically much larger firms that handle more complex transactions, such as advising companies on mergers and acquisitions or underwriting new stock offerings.

What credit unions offer

Credit unions offer many of the same services as banks. You can get a checking or savings account, use a debit card, get a loan and even invest in products like certificates of deposit (CDs) and money market accounts.

But there are some key differences between credit unions and banks. One is that credit unions are member-owned, while banks are shareholder-owned. That means credit unions don’t have to answer to Wall Street and can instead focus on their members. In practice, that can mean higher interest rates on savings accounts and lower rates on loans.

Another difference is that credit unions often have more relaxed eligibility requirements than banks. For example, you may be able to join a credit union if you live, work or worship in a certain area, while banks generally require you to meet much stricter criteria, such as having a certain amount of money to open an account.

Finally, credit unions typically offer better customer service than banks. Because they’re focused on serving their members rather than making profits, credit unions are generally more responsive to customer concerns.

Pros and Cons

There are many factors to consider when choosing between a bank or a credit union. It is important to know the difference between the two before making a decision. Banks are for-profit institutions that are owned by shareholders. Credit unions are not-for-profit institutions that are owned by their members.

Pros of banks

Banks are for-profit businesses that exist to make money for their shareholders. They do this by charging fees for their services and investing the deposits they receive from customers.

The fees they charge can be higher than those at credit unions, but banks usually offer a wider range of products and services. This can include everything from checking and savings accounts to loans, investment products, and even insurance.

Banks also have physical locations in most communities, so it’s easy to find one when you need it. And if you have an account with a national bank, you can usually use ATMs and branches of other banks in their network without paying a fee.

Cons of banks

Though there are many advantages to banks, there are also several disadvantages that customers should be aware of before choosing a bank. Below are some of the primary disadvantages of banks.

Higher Fees: One of the biggest disadvantages of banks is that they tend to charge higher fees for their products and services than credit unions. This is especially true for things like overdraft fees and minimum balance fees. For example, at my bank (a large national bank), the overdraft fee is $35 per item, whereas at my wife’s credit union, the fee is only $25.

Fewer Free Services: In addition to charging higher fees, banks also tend to offer fewer free services than credit unions. For example, many credit unions offer free checking and free online banking, while these same services often come with a monthly fee at banks.

Lower Interest Rates: Another disadvantage of banks is that they typically offer lower interest rates on savings accounts and certificates of deposit than credit unions. This means that your money will grow more slowly in a bank account than it would in a credit union account.

Pros of credit unions

There are several key advantages that credit unions have over banks. Credit unions are generally much more customer-focused than banks. They often offer lower fees and better interest rates, and they are more likely to work with you if you have financial troubles. Credit unions also tend to have better customer service, and they are often more involved in the community.

Cons of credit unions

Though credit unions have a lot of advantages, there are also some disadvantages that consumers should be aware of before making the switch.

-Credit unions typically have fewer locations than banks. This can be inconvenient if you often travel or live in a rural area.
-Credit unions may not offer all the same services as banks. For example, some credit unions do not offer business accounts or investment services.
-Credit unions usually have smaller ATM networks than banks. This can be problematic if you often need to withdraw cash when you’re away from home.

Which is better?

When it comes to financial institutions, people often ask “Which is better – a bank or a credit union?” Both have their pros and cons, so let’s take a closer look at each one.

The verdict

The verdict: credit unions are typically the better choice for consumers, although there are some exceptions. Credit unions generally offer higher interest rates on savings accounts and lower interest rates on loans than banks do. They also tend to have lower fees, a major advantage if you’re trying to save money.

That said, there are some cases where banks may be the better choice. For example, if you’re looking for a specific type of financial product that a credit union doesn’t offer, or if you need access to a large branch network, then a bank might be your best bet. Ultimately, it’s important to do your research and choose the financial institution that offers the products and services that best meet your needs.

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