Sometimes, credit unions get a bad rap. They’re not as big as some megabanks or have the same kind of marketing dollars, and as a result, they might seem harder to locate or even technologically outdated by comparison.
Is their reputation well-deserved? Definitely not. According to J.D. Power, credit unions outperform banks by every measure, ranging from consumer trust to digital channels. Here’s the truth about these important financial institutions.
See our picks for the 10 best credit unions of 2025>>
It’s true that most credit unions have requirements for membership. However, there are several major credit unions that provide pathways to membership for just about anyone, including PenFed and NASA Federal Credit Union.
For other credit unions, you will have to qualify to be a member, but the qualifications are often easier to meet than you think. You usually have to meet just one of the following requirements:
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Location: You live, work, or “worship” in a certain state or region.
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Industry: You work in an industry associated with the credit union.
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Family: You have a family or household member who’s already a credit union member.
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Partnerships: You’re an employee or member of an agency that partners with the credit union
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Other: You meet an alternative requirement, like signing up to be a member of a charitable foundation run by the credit union.
Read more: 7 credit unions anyone can join
2. Credit unions have fewer accounts and services than banks
Contrary to popular belief, choosing a credit union does not mean missing out on banking options or customer support. Nearly any credit union you choose will have the same products and services you can find at a bank, including:
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Deposit accounts: Checking, savings, CDs and more
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Loans: Personal loans, auto loans, and mortgages
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Live support: Support from live agents, whether over the phone or in person
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Alternative credit products: Products made specifically for people with little to no credit or past trouble with bank accounts, such as secured credit cards, Credit Builder Loans, and second-chance checking
Some credit unions also offer coveted credit cards with travel or cash-back rewards. For example, Alliant Credit Union’s Cashback Visa Signature card gives you up to 2.5% cash back with no annual fee or foreign transaction fees.
It’s true that some credit unions serve limited geographical areas. As with any bank, you’ll want to check and see which areas the credit union serves before opening an account. That includes searching for nearby credit unions, checking to see if they have ATMs and bank branches in your area, and checking into limitations on where they can offer the kinds of loans you’re looking for.
However, you may be surprised to find that you can do most of your banking online or via an app, regardless of which credit union you choose. Many credit unions also have nationwide or even international ATM networks with tens of thousands of fee-free ATMs.
Read more: What is the Allpoint ATM network?
Each financial institution has its own strengths and benefits — and large, national banks are often ahead of the curve when it comes to technology. However, even though some credit unions lack certain features, many are on par with their big bank counterparts.
In fact, credit unions are more focused on using technology for the benefit of customers. According to a 2024 survey by Alkami, a company that provides cloud-based digital banking solutions, the number one priority of credit unions is to invest in technology that improves member experiences. By contrast, banks also want to invest in technology, but their priority is to improve employee productivity.
Either way, you won’t be short of options if you shop around for a credit union with up-to-date technology. Most credit unions have the products and services you want and need, including Zelle for quick payment transfers, apps for iPhone and Android, and mobile check deposit.
Credit unions are generally exempt from federal income taxes due to their not-for-profit, member-owned structure. However, credit unions do pay payroll taxes (Social Security, Medicare, and other employment-related taxes) and property taxes.
Further, dividends paid to members are considered personal income and are taxed accordingly.
There’s no need to worry that your money is safe at a credit union. Like banks, credit unions are heavily regulated and monitored by federal agencies. Credit union deposits are typically insured up to $250,000 per depositor per institution per ownership category.
The only difference between banks and credit unions in this area is which agency is responsible for their oversight. While banks are regulated and insured by the Federal Deposit Insurance Corporation (FDIC), credit unions are regulated and insured by the National Credit Union Administration (NCUA).
Read more: Can credit unions fail?
Most people can benefit from choosing a credit union over a bank. One of the main reasons is credit unions help you earn more interest and save more money.
How? That’s because credit unions are owned by members instead of shareholders, so they’re able to pay you higher rates on your deposits, charge lower interest rates on loans and credit cards, and offer lower account fees.
For example, the national average interest rate on bank credit cards is 15.29%, but for credit union cards, it’s 12.86%. For a 60-month new car loan, the average bank rate is 7.21%, while the average credit union rate is 6.40%.
Credit unions are also great for people with little-to-no credit. Not only do they tend to have more flexible credit requirements to qualify for loans, but they also offer loans and credit cards meant to help you build your credit from scratch. And depending on the credit union, you might also have access to free credit counseling as a member.
If you’re interested in joining a credit union, start by researching which one you qualify to join. Then, compare the products, interest rates, fees, and other features that are most important to you to narrow your choices.
