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)

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