Which is safer credit unions or banks?
One question that often arises is, "Are Credit Unions Safer than Banks?" If you're looking for a short answer, you'll be happy to know that we're not making you read the whole post: Credit Unions and banks are roughly identical in safety because deposits at both are insured by the Federal government to $250,000.
Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions. Seven banks have failed in 2023 and 2024, and all were insured.
Are Credit Unions FDIC Insured? No. Credit unions are insured by the National Credit Union Administration (NCUA). Just like the FDIC insures up to $250,000 for individuals' accounts of a bank, the NCUA insures up to $250,000 for individuals' accounts of a credit union.
Limited accessibility. Credit unions tend to have fewer branches than traditional banks. A credit union may not be close to where you live or work, which could be a problem unless your credit union is part of a shared branch network and/or a large ATM network such as Allpoint or MoneyPass.
Neither one is safer than the other. Both the NCUA and FDIC are backed by the federal government.
In addition, credit unions tend to take lower risks compared to banks. They maintain conservative lending practices and focus on member services rather than profit. Because they are not driven by the same profit motives, they may be less exposed to risky financial behaviors that can lead to instability.
Which is Safer, a Bank or a Credit Union? As long as you are banking at a federally insured institution, whether it is a credit union insured by the NCUA or a bank by the FDIC, your money is equally safe.
High-quality corporate bonds, also called investment-grade bonds, are usually considered safe investments during recessions. Bond raters deem these issuers able to service their debt. As stocks tumble, investors often shift toward investment-grade bonds, which helps preserve portfolio capital.
Also known as a liquidation estate. If the member shares are not assumed by another credit union, all verified member shares are typically paid within five days of a credit union's closure. No member of a federally insured credit union has ever lost a penny in insured accounts.
A bank run occurs when a large group of depositors withdraw their money from banks at the same time. Customers in bank runs typically withdraw money based on fears that the institution will become insolvent. With more people withdrawing money, banks will use up their cash reserves and can end up in default.
Should I use a credit union or a bank?
Credit Union and Bank Rates
On average, credit unions offer higher saving rates and lower loan rates, which could help your savings grow faster and your loan will cost less. Credit unions also tend to charge lower fees, require lower deposit balances and offer tailored services and products to their members.
The most common reasons members leave credit unions are related to convenience: They dislike the lack of local branches (something you can't easily fix) They're frustrated by clunky online and mobile experiences (something you absolutely can fix)
The number of bank accounts you should have depends on your financial needs, though it's common to have at least a savings account and a checking account. Having multiple bank accounts can help organize your spending, but may be a lot to manage.
Failed credit unions can merge with other financial institutions or be sold to other credit unions that take over management of your accounts, including deposits and loans. Or the NCUA will close the credit union and ensure you get your insured deposits back.
The FDIC insures bank accounts for up to $250,000 per depositor, per ownership category, per bank. If a bank fails, insured deposits will be moved to another FDIC-insured bank or paid out. You'll usually get a Receiver's Certificate for money that isn't covered by FDIC insurance.
| Type of savings account | Typical APY | Interest on $10,000 after 1 year |
|---|---|---|
| Savings account paying competitive rates | 5.00% | $512 |
| Savings account paying the national average | 0.57% | $57 |
| Savings accounts from various big brick-and-mortar banks | 0.01% | $1 |
What are the largest exposures (risk concentrations) in credit unions? Concentration in credit portfolios is considered to be the most significant source of risk to financial institutions.
First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.
Credit unions are federally insured by the National Credit Union Share Insurance Fund (NCUSIF), which is backed by the full faith and credit of the U.S. government. The bank equivalent is the (more widely known) Federal Deposit Insurance Corporation (FDIC).
Through “right of offset,” the government allows banks and credit unions to access the savings of their account holders under certain circumstances. This is allowed when the consumer misses a debt payment owed to that same financial institution.
Should I move my money from a bank to a credit union?
Switching from a bank to a credit union can save you money and give you peace of mind knowing you have a trustworthy banking partner that puts your interests above those of outside shareholders.
National Credit Union Administration (NCUA) credit unions had five conservatorships/liquidations in 2023, and one so far in 2024. Similarly, there were five Federal Deposit Insurance Corp. (FDIC) bank failures in 2023 and one bank failure so far this year.
A certificate of deposit (CD)
Unlike high-yield savings accounts, CD rates are fixed at the time you open the account. If you open a CD at the beginning of a recession when interest rates are high, you'll be able to lock in a high rate for the entirety of the CD's term, even if interest rates go down.
- Seek Out Core Sector Stocks. During a recession, you might be inclined to give up on stocks, but experts say it's best not to flee equities completely. ...
- Focus on Reliable Dividend Stocks. ...
- Consider Buying Real Estate. ...
- Purchase Precious Metal Investments. ...
- “Invest” in Yourself.
If you're looking for the safest place to keep your money, look no further than a savings account. Your money will be insured by the FDIC, and you'll have access to it at any time via an online transfer or a debit/ATM card, depending on the policies of your bank.
