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Credit Union CDs vs. Commercial Bank CDs: What's the Difference?

Where to buy a certificate of deposit is mostly a matter of personal preference

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Matt Webber is an experienced personal finance writer, researcher, and editor. He has published widely on personal finance, marketing, and the impact of technology on contemporary arts and culture.

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Updated February 20, 2024
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While credit union CDs and commercial bank CDs are more similar than not, key differences include some terminology, interest rates, providers, and who each is available to.

Key Takeaways

  • A typical certificate of deposit (CD) often works similarly whether a bank or a credit union issues it. 
  • Credit union and bank CDs may be insured for up to $250,000 in the event of financial institution failure.
  • Credit union CDs may be called share certificates, pay higher dividends (interest) on average compared to commercial bank CDs.
  • Commercial bank CDs may be available to a broader customer base without member qualification requirements.

Credit Union CDs vs. Bank CDs: An Overview

CD rates are generally higher at credit unions than at banks, on average. Of course, you may find the best CD rates at various institutions, including banks.

However, banks offer CDs to anyone interested—you don't need to bank at the institution. A credit union may only offer CDs to members and may also use different words to describe CDs and interest paid.

Both credit union and bank CDs are insured for up to $250,000, although by different entities.

Other than these differences, most certificates work similarly. When you put your money into a traditional share certificate, you commit to leaving cash in the account for a set period.

In exchange, the issuer pays a higher interest rate than standard savings accounts. Taking money out before the end of the CD's term could lead to an early withdrawal penalty, sometimes a substantial one.

Taking money out before the end of the CD's term could lead to an early withdrawal penalty, sometimes a substantial one.

  Credit Union CDs Commercial Bank CDs
Called CDs, Share Certificates CDs
Pays Dividends Interest
Interest Rates Higher Lower
CDs Insured By NCUA FDIC
CD Availability  Members Broader public
Joining Fee Sometimes No

Credit Union CDs

A credit union CD may be called a share certificate, depending on the credit union. At a credit union, the interest paid may be called a "dividend" instead of interest.

Credit unions may offer better dividends or interest rates on CDs. A 2023 comparison of bank and CD rates found that a credit union's national average interest rate was higher for $10,000 in CDs ranging from three months to five years.

Share certificates and CDs at federally insured credit unions are covered by the National Credit Union Administration (NCUA). Congress created the National Credit Union Share Insurance Fund to insure credit union member’s deposits up to the $250,000 federal limit.

Finally, credit union CDs may only be available to credit union members. Qualifying for membership means falling within the field of membership, which could be a common employer, geographic location, group membership or being related to another member.

However, some credit unions are open to a wide field of membership, with easy ways to join, such as donating to a specific nonprofit organization.

Some credit unions require new members to pay a fee for membership or deposit a small amount into a savings account when joining.

Commercial Bank CDs

A commercial bank pays interest on its certificate of deposits. CD rates, on average, are lower at commercial banks versus at credit unions.

Bank CDs are federally insured for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC) if that institution fails. Congress also created the FDIC to help maintain stability and boost public confidence in the nation's financial system.

Unlike credit unions, banks may offer CDs to just about anyone. You typically don't have to qualify in some special way to sign up for a CD account beyond presenting the ID required.

CDs are among the safest investments available because a bank or credit union guarantees the interest rate it promises you when you sign up. Investopedia's list of best bank CD rates is based on about 200 banks and credit unions that accept customers nationwide.

Which Is Better: A Commercial Bank or a Credit Union?

The best financial institution for you when deciding between a credit union vs. bank depends on your personal preferences, whether you want in-person or online-only services, and whether you qualify for credit union membership.

Are Bank and Credit Union CDs Safe?

Yes, if they're federally insured, as most CDs are. When you open a CD with an FDIC- or NCUA-insured institution, up to $250,000 of your money at that institution is protected by the U.S. government.

What Is the Best CD?

The best CD for you can depend on how long you can afford to tie up your money—CDs are available in terms lasting from a few months to a number of years. You could face substantial early-withdrawal penalties if you withdraw money out prematurely. Because CDs are otherwise fairly similar, you can shop around for a CD with the best interest rate for that particular term. But make sure that it is covered by either FDIC or NCUA insurance.

What Terms Are CDs Available for?

You can buy a CD that matures in as little as a month or as long as 10 years or more. The most common terms you're likely to see at banks and credit unions today are three months, six months, two years, five years, and so on. The longer a CD's term, the higher the interest rate it is likely to pay. However, your money will be inaccessible to you (without a penalty) for a longer period of time and it will also be more subject to inflation risk.

The Bottom Line

A typical certificate of deposit (CD) works in much the same way whether it is issued by a bank or a credit union. Choosing between the two types of financial institutions is largely a matter of personal preference and whether you qualify for a credit union's membership, although it's wisest to shop around for a competitive interest rate and compare fees.

Article Sources
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  1. National Credit Union Administration. “What Is a Credit Union?.”

  2. National Credit Union Administration. "Share Insurance Fund Overview."

  3. FDIC. "Deposit Insurance."

  4. Office of the Comptroller of the Currency. "What Are the Penalties for Withdrawing Money Early from a Certificate of Deposit (CD)?"

  5. Financial Industry Regulatory Authority. "Certificates of Deposit (CDs)."

  6. National Credit Union Administration. "Credit Union and Bank Interest Rate Comparison."

  7. National Credit Union Administration. "Credit Union and Bank Rates 2023 Q2."

  8. Mycreditunion.gov. "Find, Join or Start a Credit Union."

  9. FDIC. "About."

  10. Helpwithmybank.gov. "I Want to Open a New Account. What Type(s) of Identification Do I Have to Present to the Bank?"

  11. U.S. Department of Securities and Exchange. "Certificates of Deposit (CDs)."

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