Are Credit Unions Safer Than Banks in a Collapse? (2024)

Are Credit Unions Safer Than Banks in a Collapse? (1)

As a result of the recent banking crisis, which started in March 2023, many people have feared for the safety of their money – wondering if the financial institutions they use will also collapse. In this article, we will respond to some of the common questions posed by our members recently: Are credit unions safer than banks in a collapse? Are credit unions FDIC insured? Is my money protected?

Before we dive in, let’s give an overview of what happened. Beginning on March 10 2023, Silicon Valley Bank (Santa Clara, CA) and Signature Bank (New York, NY), failed within two days of each other after major bank runs following a 40-billion dollar loss from investors.

The two collapses began a spiral of panic, alluding to banks moving emergency funds in preparation of more failures. Credit Suisse, First Republic Bank, and UBS were three major financial institutions affected. Each of these banks is protected under the FDIC, but only to a certain limit which we will expand more on.

Now, we will take a closer look at common questions regarding credit unions, and how they compare to banks regarding risk exposure, insurance, and safety.

Are Credit Unions Safer than Banks in a Collapse?

Yes. Generally speaking, credit unions are safer than banks in a collapse. This is because credit unions use fewer risks, serving individuals and small businesses rather than large investors, like a bank.

Credit unions are member-owned, not-for-profit organizations that serve a smaller, more defined client base within a community. On the other hand, banks serve most of the population with multiple locations and access to bankers nationally or globally. Because of this, investors and large corporations will choose a bank over a credit union.

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. Beyond that amount, the bank or credit union takes an uninsured risk.

According to Marc Treichel, who served as executive director during his 33-year career at the NCUA, U.S. banks have an average of 36% uninsured assets compared to 9% uninsured with credit unions. He emphasized that the failing banks had significantly more uninsured assets – Silicone Valley Bank had a whopping 90% uninsured risk.

Is Money Safe at a Credit Union?

Yes, money is safe at a credit union which is protected and insured through the NCUA. A credit union is safer than a bank during a banking crisis because:

  • Credit unions are owned by members, not by stockholders like a bank
  • Credit unions take much lower risks than banks
  • Credit unions are insured by the NCUA and will have a logo on the website
  • Credit unions serve a smaller community and member base

1st Ed Credit Union is Here to Help

For any additional questions concerning the current bank crisis, 1st Ed Credit Union is here to help by phone or email. If you live in Pennsylvania and believe that a credit union is right for you, review our membership eligibility and apply now to become a part of our credit union family!

Are Credit Unions Safer Than Banks in a Collapse? (2024)

FAQs

Are Credit Unions Safer Than Banks in a Collapse? ›

Yes. Generally speaking, credit unions are safer than banks in a collapse. This is because credit unions use fewer risks, serving individuals and small businesses rather than large investors, like a bank.

Are credit unions safer from collapse than banks? ›

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.

Are credit unions safe in a market crash? ›

Both can be hit hard by tough economic conditions, but credit unions were statistically less likely to fail during the Great Recession. But no matter which you go with, you shouldn't worry about losing money. Both credit unions and banks have deposit insurance and are generally safe places for your money.

Which is safer FDIC or NCUA? ›

One of the only differences between NCUA and FDIC coverage is that the FDIC will also insure cashier's checks and money orders. Otherwise, banks and credit unions are equally protected, and your deposit accounts are safe with either option.

Can the government take your money from a credit union? ›

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.

Will credit unions fail if banks fail? ›

Some credit unions are federally insured by the National Credit Union Administration (NCUA) in the United States, and others are privately insured. This provides deposit insurance similar to the Federal Deposit Insurance Corporation (FDIC) coverage offered by banks.

Are credit unions safe if banks fail? ›

Like banks, which are federally insured by the FDIC, credit unions are insured by the NCUA, making them just as safe as banks.

Is my money safer in a credit union than a bank? ›

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.

What happens to credit unions when banks collapse? ›

If the bank fails, you'll get your money back. Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch. Credit unions are insured by the National Credit Union Administration.

What happens to credit unions when banks crash? ›

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.

How safe is my money in a credit union? ›

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. Credit unions are owned by the members—your savings account at a credit union is a share of ownership.

Why are credit unions not FDIC-insured? ›

No, the Federal Deposit Insurance Corporation (FDIC) only insures deposits in banks. Credit unions have their own insurance fund, run by the National Credit Union Administration (NCUA). The National Credit Union Administration is a US government agency that regulates and supervises credit unions.

How much of your money is insured in a credit union? ›

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. The National Credit Union Administration (NCUA) is the independent agency that administers the NCUSIF.

Can banks seize your money if economy fails? ›

In conclusion, banks cannot seize your money without your permission or a court order. However, there are scenarios where banks can freeze your account and hold your funds temporarily.

Can a bank run happen to a credit union? ›

Typically, a bank run hits just one financial institution. However, a single bank run might help trigger bank runs at other institutions. But since the Great Depression, bank runs have been unusual, thanks in large part to federal insurance of deposits at banks and credit unions.

Is Capital One safe from collapse? ›

Your money is safe at Capital One

Capital One, N.A., is a member of the Federal Deposit Insurance Corporation (FDIC), an independent federal agency.

Are credit unions protected from collapse? ›

Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.

Are credit unions safe from economic collapse? ›

Stocks, mutual funds and other investments aren't guaranteed in a recession. But money held in a federal credit union, and most state-chartered credit unions, is protected. Credit unions are regulated by the National Credit Union Administration (NCUA), the federal insurer of credit unions.

What happens if credit union fails? ›

The credit union can resolve its operational problems and be returned to member ownership; The credit union can merge with another credit union; or. The NCUA can liquidate the credit union.

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