Are Credit Unions Safer than Banks? (2024)

FAQs

Are Credit Unions Safer than 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.

Credit unions and banks are both insured, with most banks being insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per customer. Most credit unions are similarly insured by the National Credit Union Administration (NCUA) for up to $250,000.

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.

However, because credit unions serve mostly individuals and small businesses (rather than large investors) and are known to take fewer risks, credit unions are generally viewed as safer than banks in the event of a collapse. Regardless, both types of financial institutions are equally protected.

The Bottom Line. Credit unions can be ideal for a low-interest loan, lower mortgage closing costs, or reduced fees, but you'll need to qualify for membership. Larger banks may offer you more choices regarding products, apps, and international or commercial products and services, and anyone can join.

If a credit union is placed into liquidation, the NCUA's Asset Management and Assistance Center (AMAC) will oversee the liquidation and set up an asset management estate (AME) to manage assets, settle members' insurance claims, and attempt to recover value from the closed credit union's assets.

Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.

People choose banks primarily because of the convenience of multiple branches across the country, along with better technology. On the flip side, people choose credit unions primarily because of discounted loan rates, higher interest rates and better customer service.

Because credit unions are not-for-profit, they can offer members numerous benefits that can directly and indirectly build an individual's credit score.

Should I worry about my money in a credit union? ›

In fact, in the last ten years, far less than 1% of banks have failed (USA Today). Additionally, the money held in most accounts at a failed bank is insured through the Federal Deposit Insurance Corporation (FDIC). Money held in credit union accounts is insured through the National Credit Union Administration (NCUA).

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.

The NCUA insures credit union accounts, while the FDIC provides insurance for bank accounts. They both come with the same limits on insurance coverage. A decision about whether to store money in a credit union or bank shouldn't be affected by which federal agency insures the institution.

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.

The pros of credit unions include better interest rates than banks, while the cons include fewer branches and ATMs.

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.

Banks and credit unions are both safe places to keep your money when federally insured. However, it's important to note that the two types of financial institutions receive insurance through different agencies. While the FDIC secures bank deposits, the NCUA safeguards deposits at credit unions.

Credit unions, however, are unique in that they are much safer for people to put their money into because they are less vulnerable to bank runs or liquidity issues, the same factors that caused the Silicon Valley Bank collapse in March 2023, along with the fall of several other banks.

Your Money is Safe in Federally Insured Credit Unions

Federally insured credit unions offer a safe place for you to save your money, with deposits insured up to at least $250,000 per individual depositor.