If you’re setting up a small business in the US, figuring out where to put your money can be a bit of a puzzle. You might be wondering whether a credit union or a bank is the better fit. From interest rates to convenience and how well they align with your values, there’s a lot to think about. For newcomers, navigating these choices can feel especially complex while learning how the US financial system works.
At Remitly, we understand the challenges that come with making financial decisions in unfamiliar systems. In this article, we’ll break down the key differences between credit unions and banks, so you can feel more confident choosing the one that fits your small business goals.
Understanding credit unions and banks
If you’re planning to open a small business in the US, one of the practical choices you’ll need to make is where to keep and manage your money. Credit unions and banks are the two most common options.
What is a credit union?
A credit union is a not-for-profit financial institution owned by the people who use it. When you open an account, you’re not just a customer—you’re a part owner. Credit unions are typically used by specific groups, such as people in a certain region or profession, but many now welcome anyone who meets basic membership criteria.
If you’re a small business owner, credit unions can give you helpful features like more personal service, lower fees, and flexible loan options. However, because they tend to be smaller than banks, they might have fewer branches or online tools. Some might have limited eligibility requirements.
What is a bank?
Banks are for-profit financial institutions that are open to the general public. They offer a wide range of services, from checking and savings accounts to loans, merchant services, and investment products. Many banks are large, with widespread branch networks and advanced digital tools.
For business owners, banks can provide access to specialized products and more financial flexibility. However, they might come with higher fees, and the experience can feel less personal, especially if you’re working with a big national institution.
How is money protected?
Whether you choose a credit union or a bank, your money is protected by different organizations. Most credit unions are insured by the National Credit Union Administration (NCUA), while banks are covered by the Federal Deposit Insurance Corporation (FDIC). Both offer the same protection: up to $250,000 per depositor, per institution, for each type of account ownership.
Before opening an account, it’s a good idea to check that the institution is federally insured. It’s one simple step that helps keep your money safe, no matter where you are in your US financial journey.
Key differences between credit unions and banks
Before choosing where to open your business accounts, it’s helpful to know how credit unions and banks operate behind the scenes. While they offer many of the same basic services, their structure, purpose, and who they serve can be quite different.
Who owns them and how they work
- Credit unions are cooperatives, which means they’re owned by their members. When a credit union makes money, those profits are usually reinvested in its members in the form of lower fees or better savings rates.
- Banks are owned by shareholders or private investors. Profits go to these owners, which can affect things like fees, interest rates, and the kinds of products they offer.
Why profit models matter
- Credit unions are not-for-profit. Their main goal is to support their members’ financial well-being, not to maximize earnings. That’s why they often focus on affordability and community service.
- Banks are for-profit businesses. They aim to grow and deliver returns to investors, which sometimes leads to more emphasis on selling products or charging fees.
Who can open an account?
- Credit unions usually have some type of membership requirement, like living in a certain area, working in a specific field, or being part of a group. However, many credit unions have expanded their rules and are more accessible than you might expect.
- Banks are open to anyone who meets their basic requirements, like a minimum deposit. There’s no need to belong to a specific group or community.
Why some small business owners choose credit unions
Credit unions offer a different kind of banking experience that’s often more personal and community-centered. For many small business owners, especially those building their lives in a new country, this approach can help them feel more supported and less overwhelmed when managing their finances.
A more personal experience
Because credit unions tend to serve specific communities, their staff often take the time to get to know the people they work with. If you value in-person service or like speaking with someone who understands your situation, this can be a useful advantage. It’s not unusual for members to be greeted by name or offered extra time to talk through loan questions or account options.
For newcomers starting a small business, that kind of personal care can be especially helpful. Whether you’re setting up your first business checking account or exploring loan possibilities, you may find that credit union staff are more patient and willing to guide you step by step.
Fairer rates on loans and savings
Since credit unions don’t aim to make a profit, they often pass on savings to their members. This might show up as lower interest rates on loans or fewer fees, which can make a real difference when you’re working with a limited budget.
If you’re looking to build up a savings cushion for your business, credit unions may also offer better returns on savings accounts or certificates of deposit. Even small differences in rates can add up over time, helping you manage cash flow or plan with more confidence.
Being part of something
Joining a credit union means more than opening an account. You’re becoming part of a cooperative where members have a voice. For small business owners who value community, this can feel more meaningful than banking with a larger institution.
Some credit unions also go a step further by offering workshops, financial education, or meetups for local entrepreneurs. If you’re still getting to know the US financial system, these resources can help you learn, connect, and grow your business with more support.
Why some small business owners choose banks
Banks can offer a wide range of services. You might choose a bank if your small business has more complex needs or if you’re planning to grow across different locations.
More locations, more convenience
Many banks, especially national ones, have branches and ATMs all over the country. This can be helpful if you travel for work, have customers in different regions, or hope to expand your business over time. Even smaller community banks often belong to ATM networks that reduce or remove fees, making everyday banking easier.
If you move or your business changes locations, having a bank with a larger footprint may make it simpler to stay connected to your accounts, no matter where you go.
A wider selection of financial tools
Banks often have the resources to offer a wide variety of financial products. If your business needs services like foreign currency exchange, cash flow management tools, or different kinds of loans, a bank might have more options to choose from.
For business owners managing tricky finances, like multiple accounts, payroll systems, or seasonal cash needs, banks can help you with more tailored support. Some also offer limited-time deals on loans or credit cards designed specifically for small businesses.
A few things to consider with credit unions
While credit unions offer many benefits, they may not be the right fit for everyone. There are a few practical points to keep in mind before opening an account.
Who can join
Unlike banks, credit unions often have membership rules. While many credit unions have broadened their eligibility, a few still stick to stricter guidelines. Even if a credit union offers everything you’re looking for, you might not qualify if you live or work outside the group they serve.
Fewer branches and ATMs
Credit unions usually have fewer physical branches and ATMs. If you travel often or plan to relocate, this could be less convenient. Some credit unions participate in shared ATM networks to help expand access, but coverage can still vary depending on your location.
It’s a good idea to check which ATMs and branches are available near you, and anywhere else you expect to do business, before you open an account.
Less access to advanced tools
Some credit unions may not offer the same range of digital features, financial products, or services that larger banks provide. This isn’t always the case, but if your business relies on advanced online tools or specialized financial products, it’s worth asking what’s available.
How to decide what’s right for you
There’s no one-size-fits-all answer when it comes to choosing between a credit union and a bank. Both can be great options—it just depends on your small business.
Thinking about your day-to-day needs
Start by looking at how you handle your business finances from day to day. Ask yourself:
- Will you need access to branches in different cities or states?
- Are you looking for specific loan types or financial tools?
- Do you value local, community-focused service more than a wide range of digital features?
If personal attention and a strong local connection matter most to you, a credit union may be the better fit. But if your business depends on services like international wire transfers or tools to manage complex finances, a bank might meet your needs more effectively.
Weighing costs and long-term value
Fees and rates can vary quite a bit, so it’s worth looking at the details. While both banks and credit unions may charge for things like account maintenance or overdrafts, credit unions often keep these costs lower. Banks, on the other hand, might offer occasional promotions or added perks, but those aren’t always long-term.
As you compare options, consider:
- Monthly account and transaction fees
- Loan interest rates and savings account yields
- Costs for services like payroll or merchant support
- Any extra charges for wire transfers or overdrafts
Choosing what feels right for you
In the end, your choice will come down to what kind of banking experience you’re most comfortable with. Some small business owners prefer the convenience and range of services that come with a large bank. Others feel more supported in a credit union where relationships come first.
No matter which you choose, both types of institutions in the US are well-regulated and insured. When you’re ready to decide, take the time to read reviews, ask questions, and speak with staff. The more informed you are, the more confident you’ll feel in your choice.
FAQs
Is a credit union or a bank better for my business?
It depends on what matters most to you. Credit unions offer a more personal, community-based approach, while banks provide wider access and more digital tools.
Are there any downsides to credit unions?
Some credit unions have membership rules you’ll need to meet. They might also offer fewer products or have smaller branch networks.
Do credit unions have weaker technology?
Some credit unions have more basic online tools than large banks. However, many are working to improve their digital services.
Are credit unions risky?
Like all financial institutions, credit unions can face challenges during economic downturns. However, federally insured credit unions protect deposits of up to $250,000 per member.
Who usually banks with credit unions?
People who value personal service, local connections, or lower fees often choose credit unions. This includes small business owners, immigrants, and students.
How do credit unions make money?
They earn income from loan interest and small service fees. Profits go back into the credit union or are shared with members through better rates or lower fees.