Understanding Credit Unions: Benefits and Drawbacks

When deciding on a financial institution, you may wonder, “What is the point of a credit union?” or “Is a credit union better than a bank?” This article explores the benefits and drawbacks of credit unions to help you decide whether this type of financial institution is the right choice for you.

What Is the Point of a Credit Union?

A credit union is a member-owned, not-for-profit financial institution that serves the financial needs of its members. Credit unions prioritize serving their members over maximizing profits for shareholders. The main point of a credit union is to offer financial services at lower costs and with personalized attention, benefiting the members directly.

Is a Credit Union Better Than a Bank?

Whether a credit union is better than a bank depends on your financial needs and preferences, here are some advantages of choosing a credit union:

  • Lower fees and interest rates: Credit unions often offer lower service fees and more favorable interest rates on loans and deposits.
  • Personalized service: Credit unions are community-focused, providing customized service and building relationships with their members.
  • Member dividends: Credit unions may return excess earnings to members as dividends on their accounts.

While these benefits make credit unions an appealing choice for many, there are some situations where a bank may be more suitable, especially if you require a wide range of products and services or extensive accessibility.

Why Would You Not Use a Credit Union?

Despite their advantages, there are reasons why some people might choose not to use a credit union:

  • Limited services and products: Credit unions may offer a more limited range of products and services than larger banks, such as investment options and international banking.
  • Accessibility: Credit unions often have fewer branches and ATMs than larger banks, which can disadvantage those who travel frequently or prefer in-person banking.
  • Membership restrictions: Credit unions often require membership criteria, such as being part of a specific community or organization, which may not suit everyone.

What Is the Downside of a Credit Union?

In addition to the reasons mentioned above, there are other potential downsides of using a credit union:

  • Technology limitations: Some credit unions may not offer the latest mobile banking apps and online services, which can be a drawback for tech-savvy customers.
  • Size and scale: Smaller credit unions may have fewer resources to invest in infrastructure and innovative products, potentially impacting service quality.
  • Limited rewards programs: Credit unions may not offer as many rewards or cash-back offers as larger banks.


Credit unions provide a member-focused approach to financial services, often offering lower fees, personalized service, and community involvement. However, limited services, accessibility, and membership requirements may challenge some customers. Consider your financial needs and preferences carefully when deciding whether to use a credit union.

We hope this article helps you better understand credit unions’ benefits and drawbacks. Please explore our other resources if you have any questions or need more information.