There are many different factors to consider when choosing between a credit union and a bank. Either way, you’re entrusting a lot to these financial institutions. Naturally, a very important concern you’ll have is how safe and secure your money will be. But is one option more secure than the other? Read on below to find out if credit unions are safer than banks.
Are Banks Safer Than Credit Unions?
The short answer is that credit unions are at least equally as safe as banks. Both types of financial institutions are federally insured, for instance. This means account holders are protected should their institution fail. But there are some situations where credit unions have the potential to be more secure. They come with some benefits over banks as well. Let’s take a closer look.
Are Credit Unions Safer Than Banks in the Case of a Recession?
People are especially concerned about how safe their money is when there is a financial crisis, or just general uncertainty. This includes issues like a recession. While no one can fully prepare for a recession, it’s still good to keep in mind when making your decision about credit unions versus banks.
As it turns out, this is an area where the data shows that credit unions are safer than banks. In previous recessions, credit unions fared better than banks. Recessions aren’t great for anyone, of course, but credit unions generally aren’t hit quite as hard.
So, if a recession occurs, statistics show that credit unions are the safer, more secure choice. However, that doesn’t mean banks are unsafe. And no matter which financial institution you choose, remember that you shouldn’t panic if a recession does happen. Credit unions and banks both ensure financial safety and anticipate the possibility they could fail. This is where federal insurance comes in.
Credit Unions Are Insured Just Like Banks
You may assume banks are safer than credit unions because banks are insured by the Federal Deposit Insurance Corporation (FDIC). But did you know that credit unions are federally insured as well? In the case of credit unions, the insurance is provided by the National Credit Union Share Insurance Fund, administered by the National Credit Union Administration (NCUA). The NCUA is a federal agency that monitors and regulates credit unions throughout the United States. But what you really need to know about the NCUA is that, if your credit union fails, they have your back.
Here are a few things to note about the NCUA and FDIC.
- The insurance may have different names, but the level of protection is the same.
- In the case of both banks and credit unions, the insurance coverage is backed by the United States government.
- Both insure up to $250,000 for accounts.
- Both give you assurance that your money is safe and you won’t lose anything if the worst-case scenario happens and your financial institution fails.
In summary, the insurance coverage for credit unions makes them just as safe as banks. The only real differences are the agency names and the type of financial institutions they cover.
How Do You Know If a Credit Union Has NCUA Coverage?
Almost every credit union in the United States has insurance coverage through NCUA. So, it’s more likely than not that any credit union you want to join will have this government-backed insurance. However, there is a difference between federal- and state-charted credit unions. Most state-charted credit unions will still have NCUA coverage. But there may be exceptions, so check with your particular institution.
If you’re at a state-charted credit union without federal insurance, don’t panic. The credit union will still be insured, but the coverage will just be through a private insurer. But again, this is extremely rare.
Still have questions or want more information? You can find a more in-depth breakdown of NCUA, how it works, and the coverage it provides, via this Bankrate guide.
How the Members-First Approach Makes Credit Unions Feel Safer Than Banks
You may also feel more secure trusting a credit union rather than a bank because of the personal connection. Members have far more say with credit unions. And this typically leads to a trusting relationship, which you won’t find with every financial institution.
With a credit union, you can be sure the members are the priority. After all, credit unions are not-for-profit and member-owned. Banks, on the other hand, have a board of directors as well as investors they need to keep happy. The personal connection simply isn’t as important.
Credit unions also pride themselves on having excellent customer service. Being able to talk to a patient, knowledgeable, and friendly team member makes credit unions feel safer than banks. With banks, it’s less likely you’ll be communicating with a real person, let alone one that has enough time to really tend to all of your needs.
How to Choose Between Credit Unions and Banks
At the end of the day, of course, the most important thing is that you are making the best financial institution decision for you. Doing so is another way you’ll feel safer about your finances.
But as you now know, credit unions and banks are equally safe. Credit unions have the advantage of a personal relationship, while banks are larger in size. It’s up to you which characteristics make you feel more at ease.
Now that you know credit unions are as safe as banks, if not safer, it’s time to consider joining one. If you live in the Pacific Northwest, consider Solarity Credit Union. Their site offers more information on credit unions, and you can apply to join right online. And you can always contact their team to ask more about their safety mea