Are big banks better than credit unions? (2024)

Are big banks better than credit unions?

A credit union might be the better choice if you value high savings account rates and low fees, plus like the idea of being part of the ownership group. But if you need a bigger menu of banking products and services and want to be near a branch, then you may be better off at a traditional bank.

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.

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.

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.

Millionaires often use a combination of both banks and credit unions for their financial needs.

Credit unions are owned by their members, so members are usually the focus of the institution. This means that credit unions are generally known for providing better customer service than banks. Nonprofit structure means better rates and lower fees.

Cons of credit unions

Membership requirements: Credit unions require you to become a member in order to open an account, and the eligibility often doesn't apply to everyone. Limited access: Credit unions usually serve a specific community or region, resulting in fewer branches and ATM access.

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.

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.

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.

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.

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.

Someone who has $1 million in liquid assets, for instance, is usually considered to be a high net worth (HNW) individual. You might need $5 million to $10 million to qualify as having a very high net worth while it may take $30 million or more to be considered ultra-high net worth.

There's no one correct answer, but it's usually best to start with at least two accounts—a checking account and a savings account. This gives you an everyday banking account for bills and other expenses and another for saving. Your bank account journey doesn't need to end there.

Credit unions typically offer better rates to members than brick-and-mortar banks. They also tailor products to their communities, and customer service is sometimes better. Credit unions may provide better or more loan options to members with fair or poor credit.

First, bankers believe it is unfair that credit unions are exempt from federal taxation while the taxes that banks pay represent a significant fraction of their earnings—33 percent last year. Second, bankers believe that credit unions have been allowed to expand far beyond their original purpose.

Could credit unions be in trouble?

It is important to note that credit unions can fail, and have, even prior to the current banking crisis. However, their depositors are made whole from payouts from the NCUA insurance fund.

You'll save more money.

Instead of paying shareholders a portion of the profit generated, credit unions return their profits to their member-owners in the form of better dividends on savings, lower interest rates on loans, interest-earning checking and fewer fees.

Nationally, two have gone under already in 2023, and on average seven failed in each of the prior five years, according to data compiled by the National Credit Union Administration, a federal agency akin to the FDIC or Federal Deposit Insurance Corp.

Since credit unions' missions are to serve their local communities, they're more likely to be in your corner during economic uncertainty compared to a big national bank. Also, a 2022 report by the Ascent stated research shows credit unions are less likely to fail compared to banks during recessions.