Are Credit Unions Safer than Banks? (2024)

FAQs

Are Credit Unions Safer than Banks? ›

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.

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.

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.

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.

Better interest rates: Credit unions typically offer higher interest rates on savings accounts because they have lower overhead costs than banks. Similarly, they offer lower interest rates on loans. Customer service: Credit unions pride themselves on offering better customer service than banks.

Money held in credit union accounts is insured through the National Credit Union Administration (NCUA). Many types of accounts are covered by insurance such as checking, savings, certificates of deposit, money market accounts, and others.

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.

Credit unions tend to offer lower rates and fees as well as more personalized customer service. However, banks may offer more variety in loans and other financial products and may have larger networks that can make banking more convenient.

Are credit unions better than online banks? ›

Branch availability: Credit unions typically have physical branches, while online banks primarily operate online. Interest rates: Credit unions may offer higher interest rates on savings accounts, while online banks like Chime and Dave offer competitive rates on specific accounts.

Any income the credit union generates through interest, fees and loans is then used to fund community projects, reinvest into the organization or provide services that directly benefit members, like paying higher savings interest rates.

Final answer: One drawback of internet-only banks is the limited availability of certain services, such as getting a document notarized. Additionally, some brick and mortar banks may not accept check payments from virtual banks.

But as we gain surer footing with a recovering economy, you should know that there is no safer place for your money than a bank or credit union – not the proverbial mattress stuffed with cash, not the locked desk drawer in the den and not even the thick-walled safe hidden in the closet.

Banks are typically for-profit entities owned by shareholders who expect to earn dividends. Credit unions, on the other hand, are not-for-profit, member-owned cooperatives that are committed to the financial success of the individuals, families, and communities they serve.

It's rare for a bank not to have FDIC insurance, but there are exceptions. Bank of North Dakota, for example, is not FDIC-insured. Instead, it is backed by the full faith and credit of the State of North Dakota.