Saturday, October 15, 2022

Are Credit Unions Safer Than Banks

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Are Online Banks Safe

Credit Unions are Different from Banks

More and more , and many people are opening new bank accounts without ever stepping foot in a brick-and-mortar bank. While online banks may seem more impersonal, it does not mean they are any less safe.

Just like traditional banks, most online banks are FDIC insured, protecting user funds. Online banks also use the latest technology, such as chip cards, and virtual cards, two factor authentication, and have similar liability protection on credit and debit cards.

Before signing up for any online bank, just ensure the accounts are insured before depositing any money.

Deposits Are Safe In Federally Insured Credit Unions

ALEXANDRIA, Va. The National Credit Union Administration is reminding credit union members of the safety of their deposits in federally insured credit unions. The NCUA also reminds individuals to remain vigilant against COVID-19-related scams.

Federally insured credit unions offer a safe place for credit union members to save money. All deposits at federally insured credit unions are protected by the National Credit Union Share Insurance Fund, with deposits insured up to at least $250,000 per individual depositor. Credit union members have never lost a penny of insured savings at a federally insured credit union. Additional information on NCUA share insurance coverage for consumers is available at .

Credit union members can calculate the amount of insured funds at a federally insured credit union using NCUAs Share Insurance Estimator . The Estimator can be used for personal, business, or government accounts. Personal accounts include individual ownership, joint ownership, payable-on-death , living trusts, and IRAs. The Estimator also includes an extensive Glossary of Terms and Frequently Asked Questions .

For questions about the NCUAs share insurance coverage, call 1.800.755.1030, option 1, Monday through Friday, 8 a.m. to 5 p.m. Eastern, or send an email to .

Benefits Of Credit Union Membership

“Credit union members benefit from generally better interest rates, lower fees, and the knowledge that their financial institution is dedicated to improving their financial well-being,” notes Credit Union National Association President/CEO Jim Nussle. “Big banks work for their shareholders, while credit unions like PenFed are focused on promoting the interests of their more than 120 million members.” Credit Union membership may offer such perks as:

  • Financial Education: Part of any credit union’s commitment to its members and communities is to teach financial best practices. Many credit unions offer financial education or counseling options to their members. This is especially important for people dealing with financial hardship. Part of the credit union’s mission is to help those who are less fortunate. That’s the credit union way.
  • Sharing the Same Values: Credit unions were designed to bring together people who share a common bond. For example, credit unions are often founded to support a specific group, such as military members and their families. Joining like-minded credit unions shows support to that group because all the members benefit as the credit union grows.

Big banks work for their shareholders, while credit unions like PenFed are focused on promoting the interests of their more than 120 million members.

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What To Consider When Choosing Between A Traditional Bank Credit Union Or Online Bank

Before choosing one financial institution over the other, ask yourself the following questions:

  • How many branches and ATMs do they have? If in-person service matters to you, look at banks and credit unions that have local branches. If youre just looking for a way to deposit and take out cash, many online banks offer their customers access to a broad network of ATMS.
  • What interest rates do they offer? Check out the interest rates on whatever accounts youre considering from different traditional banks, online banks, and credit unions. You are most likely to find the best rates with credit unions and online banks.
  • What fees do they charge, and how much are they? Do your research on the fees a traditional bank, credit union, or online bank might charge you. Most credit unions and online banks are able to offer low- to no-fee accounts due to the fact that credit unions are owned by members rather than shareholders, and online banks dont have the operational expenses that come with maintaining physical locations.
  • What features and services matter the most to you? Make note of what you want from a financial institution when it comes to services and simplicity. Consider things like mobile banking apps and automatic savings accounts when making your decision.

Did You Know?

Chime customers have access to 60,000+ fee-free ATMs¹ thats more than the top 3 national banks combined!

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Financial Products And Services Available

All banks and credit unions offer one or more types of deposit accounts, most often checking accounts and savings accounts. Many banks and virtually all credit unions also offer credit products, including home loans , auto loans , credit cards, and personal loans.

Financial Products and Services Available at Banks

Every bank, from the leanest mobile bank to the biggest multinational, offers some sort of deposit account. Some stop there, while others offer less common types of deposit accounts and investment accounts, along with credit products ranging from credit cards and personal loans to secured loans like mortgage and auto loans. Most traditional banks do make loans, historically a key revenue stream for financial companies some online banks dont issue loans directly.

The biggest financial institutions typically have the widest breadth of financial products and services, often complemented by private banking or wealth management services designed to craft bespoke financial solutions for wealthier clients. If you want to do all your banking, investing, and financial planning in a single location, you might naturally be drawn to a traditional bank built to do just that.

Financial Products and Services Available at Credit Unions

All credit unions offer savings accounts. These are usually known as share accounts because a portion of their balance usually $5 or $10 represents the members ownership stake in the institution.

Best For Military Members: Navy Federal Credit Union

  • DoD reservists, civilian employees, civilian retirees and annuitants
  • U.S. Government employees and DoD contractors assigned to DoD installations
  • Family and household members of the groups above

Locations: NFCU has 341 branches in 31 states and is based in Vienna, Virginia.

Mobile and online features: Members can access common mobile and online features, including mobile check deposits, bill pay and transfers. Plus you can send and receive money with Zelle.

Noteworthy financial products: NFCU credit cards received the highest overall satisfaction score in J.D. Power’s 2019 Credit Card Satisfaction Study, excelling in terms, benefits, services and rewards.

The Visa Signature® Flagship Rewards Credit Card is a standout offering. Cardholders enjoy a complimentary year of Amazon Prime, a reasonable 9.99% to 18.00% variable APR and up to $100 credit for Global Entry or TSA PreCheck applications every four years.

NFCU also offers a range of other credit cards, checking and savings accounts, personal, auto and student loans, mortgages and more.

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Interest Rates & Fees

When you compare interest rates for a savings or checking account at a credit union with those at a bank, you will generally find a credit union offers higher rates. When you borrow money to buy a car, home or fund another venture, your interest rate on your loan will likely be lower at a credit union.

Furthermore, most fees are lower as well. Banks may charge high fees for simple services like getting a cashiers check or signing up for overdraft protection services that credit unions may provide free or for only a nominal price.

Branch And Atm Access

Are credit unions better than big banks?

Most credit unions and many banks have physical branches where customers can make deposits, get cash, speak with loan officers, and conduct other financial business in person. Virtually all credit unions and banks also have their own branded ATMs or belong to low-fee or free ATM networks.

Banks Branch and ATM Networks

Banks branch networks come in all shapes and sizes. National and multinational giants like Bank of America and JPMorgan Chase have thousands of locations littered about the country, while single-branch community banks might serve a single small town or handful of rural communities. That said, more traditional banks have regional, superregional, or national branch networks than credit unions.

Most banks also belong to national ATM networks that include thousands or tens of thousands of in-network ATMs that charge few if any fees for cash withdrawals and other basic financial transactions. These networks may be entirely in-house for example, Chase Bank has thousands of branded ATMs scattered about the United States or shared by many different banks, like the Allpoint or MoneyPass networks. Most branchless banks belong to one of the major fee-free ATM networks.

Even larger credit unions that accept members nationwide tend to have smaller physical footprints, either in contiguous geographies or clustered in areas where lots of members live and work.

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Are Credit Unions Better Than Banks

As weve seen, depending on your individual situation, a credit union may offer a lower rate on certain types of loans. And there are other benefits that make credit unions attractive for borrowers.

For example, credit unions are nonprofit entities that offer lower rates by virtue of the fact that they return profits back into the institution. Banks, on the other hand, are privately owned or publicly traded, and profits are shifted to owners .

While these facts alone can make a credit union seem like the clear winner, the reality is, of course, more complex. After all, if credit unions were always the better option, then banks would have no reason to exist.

For one, credit unions are open only to people who are members of the credit union, and many of them have specific requirements on who is eligible, which means a credit union rate may not even be an option. Another advantage of traditional banks is the extent of product offerings, as banks tend to offer more types of loans than credit unions.

But when it comes down to it, the best option for you depends on your credit history, your loan needs, your income, and a variety of other factors. Thats why whether youre preparing to buy a house or need a personal loan to pay off debt, it definitely pays to shop around. Just make sure youre keeping credit unions on your list, as our analysis shows they tend to offer lower rates. Find credit unions and banks today on RateBunni.

Understanding A Credit Union

Credit unions follow a basic business model: Members pool their moneytechnically, they are buying shares in the cooperativein order to be able to provide loans, demand deposit accounts, and other financial products and services to each other. Any income generated is used to fund projects and services that will benefit the community and the interests of its members.

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Pros And Cons Of Banks

While large banks can have lower customer service approvals due to their often impersonal service, many small or community banks have very good customer service. And, even if the customer service at larger corporate banks seems cold or robotic, it is often consistent due to uniform training practices . Fees may be higher for banks, but there are no membership requirements.

Additionally, banks generally have more branches, easier access, and better technological developments than credit unions. This has become increasingly important for users who often depend on mobile banking services. Translation: Banks can tend to be more convenient, depending on which you choose.

Big Banks Serve Investors Not Depositors

Banks vs Credit Unions: Is One Better Than The Other ...

Hannas statement almost says it all. However, it leaves out an essential truth about big, publicly-traded banks theyre perpetually prone to fraud because they face intense pressure from investors to grow profits quarter after quarter.

It doesnt help that executive pay is often tied to stock performance. In this latest case, former Wells Fargos CEO John Stumpf agreed to pay a $17.5 million fine as the result of a separate investigation into the individual roles of executives in the sales practices fraud.

A CNBC article said he, had certified in 2015 and 2016 investor disclosures that touted the firms supposedly robust cross-sell metric, despite knowing it was misleading. In other words, his policies pressured employees to create fake accounts, he allowed this practice to continue for nearly a decade, and then he knowingly used the fake performance data to pump Wells Fargos stock price to enrich himself all at the expense of millions of working people.

Because of this accumulation of crimes, I left Wells Fargo. Because big banks like Wells Fargo are prone to fraud, I will likely never use one again.

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Insurance On Credit Union Accounts

The Federal Deposit Insurance Corporation does not cover credit unions. However, the NCUA, established in 1934, regulates federally chartered credit unions and most state-chartered credit unions. The can verify whether a credit union is federally chartered and other information.

One of the NCUA’s main responsibilities is to administer the National Credit Union Share Insurance Fund , which uses federal monies to back up shares in all federal credit unions.

The NCUA provides coverage for each individual account, joint account, trust account, retirement account , and business account for up to $250,000 per account. For example, if you have an individual account, a Roth IRA, and a business account at a credit union, your total shares are insured up to $750,000.

So What Are The Similarities Between Banks And Credit Unions

There are many similarities between a bank and a credit union as a financial institution, which operates under similar regulations pertaining to loans, mortgage, and security. In terms of financial products, credit unions vs banks debate is irrelevant because you will likely find your banking needs at both credit unions and banks.

  • Checking accounts

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Bank Vs Credit Union Eligibility

Banks are open to the general public. Regional banks that operate within a certain location may limit some or all of their banking products to people in that area. National banks usually extend individual accounts to any legal resident age 18 or older.

Theres a good chance that you’re eligible for a nearby credit union wherever you live. Some even serve members remotely or entirely online, allowing you to bank with a credit union in another state.

Bank Vs Credit Union Products

First Source – Banks vs. Credit Unions

The choice of a bank or a credit union won’t limit the products available to most customersconsumers who want to handle personal and small-business finances. The basic offerings at both types of financial institutions are virtually the same.

Most banks and credit unions offer:

  • Checking accounts
  • Home loans
  • Auto loans for new and used vehicles
  • Land and construction loans

But a bank is more likely to offer specialized products, such as student loans or trustee services. A smaller credit union may not be able to accommodate your needs in these areas, although it never hurts to ask. Some small institutions have partnerships with service providers that allow them to provide these products to their customers.

Both banks and credit unions also offer online banking services and mobile apps for account management, although a bank may offer more cutting-edge features. But both allow you to view your accounts, make deposits with your mobile device, transfer money between accounts, and pay bills.

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Why You Can Trust Bankrate

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

Our banking reporters and editors focus on the points consumers care about most the best banks, latest rates, different types of accounts, money-saving tips and more so you can feel confident as youre managing your money.

How Does A Bank Work

When you deposit money into your savings account, the bank will pay you interest. The bank then uses the money you’ve deposited to fund loans out for their customers. The longer you agree to keep your money in the bank, the more interest the bank will pay you.

The bank then loans your money to people for different types of loans. The borrower pays back the loan along with interest that’s much higher than what the bank is paying you.

So basically, the bank is a middleman, making money by lending other people’s money. The shareholders then receive the profits.

Unlike credit unions, the board of directors at a bank are paid for their efforts. The compensation varies per bank, but it can add up to substantial amounts of money.

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Online Payments Are More Common

These days, most people dont use cash or checks to make payments. According to one survey, over half of the respondents said they paid by a debit card, while only 14% actually paid with cash. Even more striking, person-to-person mobile payments are becoming more and more common, especially among young adults.

Like it or not, cashless transactions are here to stay. When you couple this with the fact that physical money can easily be contaminated with bacteria and viruses, its not hard to see how cashless transactions will become more popular than ever. If you want to use cashless transactions, though, youll need to have a checking account.

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