Banks vs. Credit Union: What Immigrants Need to Know

By October 10, 2022 April 12th, 2023 uLink Blog

The financial world is constantly competing for your time, attention, and money. 

Simply turn on the TV or scroll through Facebook, and you’ll be faced with countless advertisements for banks, credit unions, and everything in between. 

Here’s the good news: when it comes to finances, immigrants have more choices than ever.   

While institutions battle for your bucks, you have one job: to make the best choice for yourself.

You don’t need to choose the newest, the coolest, or the biggest bank or credit union

You just need to identify the right option for your unique financial needs. 

Nevertheless, the question remains: which should you choose: a bank or a credit union?

In this comprehensive article, we’ll compare the two institutions so you can understand your options and make the most informed decision possible. 

Key Article Takeaways 

In a rush? No problem. 

While we’ll dive into the details below, here are some general points to consider about banks and credit unions:

  • Banks are “for profit” institutions: they’re owned by stockholders, not customers. As such, they are ultimately concerned with monetary growth (though customer service remains important alongside revenue).
  • Credit unions are “not-for-profit” organizations: they’re owned by customers, not stockholders. Contrary to banks, credit unions are not focused on enhancing their “bottom line.” Instead, they’re primarily concerned with advancing the financial goals of their members.
  • Most bank staff consists of salaried employees, whereas most credit union staff are volunteers.
  • Traditional banks typically have a wider array of financial products than credit unions.
  • In most cases, banks charge higher loan rates than competing credit unions.
  • While credit unions offer fewer types of loan products, they generally can offer much more favorable rates than major banks.
  • As banks have larger budgets (and broader networks), they generally have more advanced digital banking technology than credit unions.
  • While credit unions may lack the technological infrastructure of competing banks, they are generally regarded for delivering a more personable level of customer service. 

Note: Keep in mind that these are general descriptions of banks and credit unions. As always, no two institutions are alike. Before you decide on a particular bank or credit union, be sure to carefully research each institution and speak with a customer representative. 

Bank: Defined

Banking services are essential to modern life. In fact, they’re nearly as old as human civilization itself. 

In its simplest form, a bank is a licensed (i.e., federally regulated) financial institution that provides customers with access to two fundamental services: deposit accounts and loans. 

In other words, a bank is a place where you can store money, make withdrawals, and utilize credit products. 

Beyond those core offerings, banks provide a full spectrum of additional services including currency exchange, wealth management, business banking, insurance protection, and more. 

As previously mentioned, banks have the ultimate goal of earning a profit for their shareholders. They accomplish this by charging increased interest on loan products issued to their customers. 

As of 2021, there were over 4,230 federally-insured banks in the United States, including national banks, state-chartered banks, retail banks, commercial banks, and investment banks.

While many of these banks have brick-and-mortar locations, the vast majority of them conduct business online. 

Why Some Immigrants Prefer Banks

When it comes to choosing a bank, size and reputation matter. 

Larger retail banks often appeal to immigrants for their name recognition, their national presence, and their total assets under management (AUM). 

For example, the three largest banks in America have nearly $7 trillion in AUM

Of course, size isn’t the only consideration. 

While larger banks have a panoply of services, smaller banks can provide similar access with added emphasis on customer service. 

In other words, smaller banks can provide the best of both worlds. 

Ultimately, immigrants choose banks for a wide variety of reasons, including their:

  • Full suite of product offerings: Banks deliver the broadest spectrum of personal and commercial banking products, including business loans, business credit cards, personal loans, money marketing accounts, Individual Retirement Accounts (IRAs), and specialized products like student loans and trustee services.
  • Fewer eligibility requirements: Banks are open to the public at large. In most cases, the only essential criteria for opening a bank account is that you’re over the age of 18 and have a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).
  • Access to ATMs: Because traditional banks have many branches, they also have the widest network of ATMs (both in America and overseas).
  • Cutting edge technology: Big banks embrace new technology (as seen on their websites and mobile apps). If online banking is a priority for you, traditional banks may be the more compelling option.  

Potential Drawbacks to Traditional Banking

Of course, banks aren’t the ideal choice for everybody.

While they provide many advantages, traditional banks have potential drawbacks that can come in the form of:

  • Higher fees: Ultimately, banks are focused on profits. Therefore, they have higher fees than credit unions, including monthly fees, annual fees, overdraft fees, and more.
  • Higher loan interest rates: To earn a profit for shareholders, banks typically charge higher interest on loan products.

    As we’ll discuss below, credit unions generally have better loan interest rates.
  • Lower deposit interest rates: According to recent data, the average savings account rate at a traditional bank is a meager 0.05%.

    In other words, your money won’t grow with much rapidity in a traditional savings account.
  • Minimum account balances: In addition to levying higher fees, many banks also include minimum account balances and requirements.

    For example, some traditional banks may require a minimum balance of $500 (along with service fees if the balance dips below the required amount).

    Such stipulations can make it more difficult for immigrants to confidently access loan products and credit cards. 

Note: These are general assessments of the traditional banking world. Remember, there is no “one-size-fits-all” approach to banking. 

As an immigrant, make it your goal to find an institution that provides the accessibility, convenience, and reliability you need to get the most out of your finances. 

Credit Union: Defined 

Credit unions have grown in popularity in recent years. In fact, total American membership now exceeds 125 million people. 

There’s a reason for the increase in enthusiasm (particularly amongst immigrants): credit unions provide many of the same services as a bank, with more affordable rates, a heightened sense of community, and a greater emphasis on customer service. 

On the surface, credit unions function quite similarly to traditional banks. For example, you can make deposits at a credit union and take out loans.

But here’s an important difference: unlike traditional banks, credit unions are “not-for-profit.”

Free from the influence of shareholders, a credit union is exclusively owned and managed by its members. 

The members of a credit union participate in a “field of membership,” which can be determined by any sort of common bond, such as a geographic location, a cultural bond, a religious belief, or any other kind of deeply held, mutual connection. 

Ultimately, while a bank pays out profits to its investors, a credit union returns profits to its members via higher savings rates, lower fees, and better interest rates for both loans and deposits. 

Why Some Immigrants Choose Credit Unions

For many immigrants, credit unions present a compelling alternative to banks. 

Though they provide the same fundamental services as a bank, credit unions are often preferred for the following reasons:

  • Common cause: Credit unions value community. In fact, they often deliberately limit their customer base to further the best interests of their members.

    While banks seek to grow, credit unions exist to benefit participants.
  • Higher deposit interest rates: By emphasizing community over profit, credit unions can set savings interest rates as high as possible.

    In fact, some credit unions are offering savings rates as high as 6%.
  • Lower interest rates on loans: While promoting greater savings, credit unions can also provide far better interest rates on loans.

    As studies show, credit unions have consistently provided better personal loan rates than competing banks in recent years.
  • Lower fees: Because banks pursue profits, they often rely on fees to generate revenue. In the first half of 2021, for example, banks earned over $6 billion from overdraft fees alone. 

Credit unions play by different rules: most not only have lower fees than banks, but they also offer checking accounts with no minimum balance.

Credit unions, therefore, provide immigrants with a lower barrier to entry (and less punitive rules after joining).


  • Quality customer service: Because credit unions are limited in size and membership, they are able to focus on developing trusted relationships and providing quality customer service.

    What’s more, members of credit unions can also vote and influence the protocols of their local branch. 

Potential Drawbacks to Credit Unions

Of course, credit unions aren’t the right choice for everyone.

While they deliver many advantages, credit unions have potential drawbacks that come in the form of:

    • Narrower product offerings: Though credit unions offer standard banking services, their financial products are generally more limited than competing banks.

      If you’re a business owner or entrepreneur, for example, you may need more specific products that only a traditional bank can provide.
    • Legacy banking technology: Most credit unions have smaller technology budgets than competing banks. After all, developing mobile apps and online banking portals are not their top priority.

      However, as digital banking grows in prominence, credit unions may soon become more competitive in the technological arena. 
  • Limited ATM networks: Banks have much wider ATM networks than most credit unions.

    Fortunately, credit unions have established a Co-op Shared Branch network to increase user access to ATMs across the country. 

Banks vs. Credit Unions: Common Questions 

Still unsure which route to choose? No problem.

Here are some frequently asked questions about banks vs. credit unions.

1. Are Banks Safer than Credit Unions?

Whether you choose a credit union or a bank, your money will be in good hands.

In fact, accounts in both institutions are insured for amounts of up to $250,000 via both the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA).

The FDIC and the NCUA are jointly responsible for insuring funds in the unlikely event a bank or a credit union fails. In other words, they guarantee your money in amounts of up to $250,000.  

2. What’s the Difference Between the FDIC and NCUA?

Both organizations provide government-backed protection for financial institutions. 

The Federal Deposit Insurance Corp (FDIC) is the organization that insures banks. The FDIC was created during the Great Depression to protect confidence in the U.S. financial system. 

Conversely, the National Credit Union Administration (NCUA) expressly insures credit unions. 

3. How can I Join a Bank or Credit Union?

Joining a bank or credit union has never been easier.

If you have a particular institution in mind, you have two methods to proceed: you can either visit an in-person location and open an account, or you can do so online via your smartphone, tablet, or computer. 

As an immigrant, you do not need a Social Security Number (SSN) to open a bank account. In some cases, you may need an Individual Taxpayer Identification Number (ITIN), which can be easily obtained without citizenship. 

While you won’t need a SSN to join most credit unions, you will need to be eligible for their field of membership. This “common bond” could be your employer, your family, your geographic location, or your membership in a particular group (such as a place of worship, a school, or a labor union). 

Though banks do not have a field of membership, they reserve the right to reject applicants due to their “financial past.”

Whether you choose to visit a branch in person or open an account online, be ready to provide identification including:

  • An up-to-date passport.
  • Government-issued ID from your home country.
  • Birth certificate.
  • Alien ID card.
  • Consular ID.
  • Foreign driver’s license.
  • Recent utility bill showing your name and current address.
  • A copy of your lease or rental agreement showing your name and current address.

Note: To learn more about applying for an ITIN, please click here

The Best of Both Worlds

Banking is an important part of your financial life.

Whether you choose a traditional bank or a credit union, you’ll be positioning yourself for short and long-term success in the U.S.

And while you strengthen your financial future in America, uLink will be in your corner to help you support your loved ones overseas.

With great exchange rates and fees starting as low as $0, you can send more money home than ever before. And when you use the uLink Money Transfer app, you can skip the wait times and hidden fees and send money home to over 156,700 locations in 67 countries. 

Plus, after your 1st, 2nd, and 5th transactions, we’ll send you a $10 gift card to use at your favorite retailers. That’s $30 in gift cards after your first five transactions with uLink. 

Miles from home—just moments away with uLink. 

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