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When it comes to deciding between using a bank or a credit union, there are several factors to consider — including safety. Credit unions have a reputation for being slightly safer than banks, but are they, really? Here’s what you need to know.

Understanding credit unions vs. banks

Credit unions and banks have plenty in common: They’re both federally insured, and they offer similar products and services. But there are a few important differences between the two that are worth understanding.

• Insurance: Deposits at credit unions and banks are federally insured up to $250,000 per depositor, per institution, per ownership category. However, banks and credit unions are insured by different entities. The Federal Insurance Deposit Corporation (FDIC) insures banks, while the National Credit Union Administration (NCUA) insures credit unions.

• Membership: Anyone can apply for an account at a bank, but a credit union’s products and services are only available to its members. To become a credit union member, you typically need to meet eligibility criteria, such as living in a specific geographic area or working for a certain employer.

• Structure: While banks operate for profit, credit unions are nonprofit organizations. Credit union members are also part-owners and have influence over decisions and operations.

• Interest rates: Because credit unions aren’t focused on earning a profit, they generally can afford to offer lower interest rates on loans and credit cards and higher interest rates on savings accounts compared to banks.

• Fees: Banks tend to charge higher fees compared to credit unions. This is because banks need to earn a profit, while credit unions can pass on earnings to their members.

• Technology: Banks tend to be more technologically advanced than credit unions. This may translate into more robust and user-friendly mobile apps and online banking platforms.

• Accessibility: Many credit unions serve a specific city, state, or region, meaning branches tend to be limited to a particular area. On the other hand, larger banks may have a bigger network of branches and ATMs across the country.

Read more: Differences between credit unions vs. banks

Are credit unions safer than banks?

While credit unions may have a reputation for being safer, you can reliably bank with either type of institution. When choosing between a bank and a credit union, the decision will likely hinge on factors other than security.

That said, here are some reasons credit unions may feel slightly safer than banks:

• Credit unions may be more likely to prioritize members’ best interests. Credit unions operate as nonprofit, member-owned organizations. That means they’re generally focused on serving their members rather than generating profits for shareholders. As a result, credit unions tend to make more conservative lending and investment decisions, prioritizing stability and members' financial well-being over high returns or riskier financial activities.

• Credit unions offer more personalized service. Credit unions usually cater to a specific community, region, or demographic, allowing them to customize their products and services to meet their members’ needs. They also tend to have a bigger emphasis on customer service. This can contribute to an overall impression of safety and stability, even if it doesn’t necessarily make credit unions safer than banks from a purely financial or regulatory standpoint.

• Credit unions tend to offer lower interest rates for borrowers. Credit unions often have lower caps on loan and credit card interest rates compared to banks, helping members save money during hard financial times.

• There are more bank failures than credit union failures. One study by researchers at the Haas School of Business at UC Berkeley found that banks have a slightly higher failure rate than credit unions (0.48% vs. 0.44%, respectively). For example, following the aftermath of the Great Recession, more than 400 banks failed, while closer to 100 credit unions failed. And in 2023, five banks failed, while three credit unions either merged or closed.

Read more: Can credit unions fail?

Again, both credit unions and banks are generally safe thanks to federal regulations and insurance. However, if you want the security of lower fees, more personalized service, and an institution that puts members’ needs first, a credit union may be the better choice for you.

Frequently asked questions

Are credit unions safer than banks in a crash?

As long as they’re insured, credit unions and banks are both safe in a financial crash. The NCUA and FDIC insure deposits of up to $250,000 at credit unions and banks. Assuming your bank or credit union is insured, your deposits are guaranteed up to that amount. However, credit unions may offer lower interest rates for borrowers. During hard financial times, this perk may make credit unions feel safer.

Is it safer to put your money in a bank or credit union?

It’s safe to put your money in either a bank or a credit union, as both are federally insured up to $250,000 by either the FDIC or NCUA. While the safety of your deposits is guaranteed at both types of institutions, there are a few reasons credit unions may feel safer to some people. For example, credit unions tend to offer fewer fees, lower interest rates on loans, and a more personalized customer experience.

What is the downside of banking with a credit union?

While credit unions offer several advantages, there are a few downsides to consider too. For example, credit unions may not offer the same accessibility banks do. Because they often serve a specific region or group of people, branches and ATMs may be limited to a small geographic area. Credit unions also may not have the range of products, services, and technology that banks have. Finally, credit unions require membership, which may be a hassle or barrier to some individuals.

Is it better to belong to a bank or a credit union?

Whether it’s better to belong to a bank or credit union depends on your preferences. If you prioritize accessibility, a wide range of products and services, and the latest digital banking tools and technology, you may prefer using a bank. But if you prioritize customer service, lower fees, and low-cost borrowing, you may want to consider joining a credit union. However, both banks and credit unions are secure places to keep your money.