Are Credit Unions a Safe Alternative to Banks Amid Financial Crisis?
The recent banking crisis may leave you wondering if credit unions are a safe place to park your cash. The truth is credit unions can still fail. But, even if yours does, you’ll probably come out of the situation financially stable.
A Snapshot of What Happened at SVB
Silicon Valley Bank (SVB) catered to many tech companies with account balances significantly in excess of the Federal Deposit Insurance Corporation (FDIC) cap of $250,000. Unfortunately, that means most of the funds the bank held were uninsured.
So, when the recent bank run happened, SVB’s cash reserves were quickly depleted, leaving the institution unable to give many customers their money. Fortunately, the federal government agreed to make depositors whole, and SVB subsequently got purchased by First Citizens Bank & Trust Company. However, without these interventions, SVB’s failure would likely have had a devastating ripple effect on the economy.
Why the SVB Scenario Likely Wouldn’t Happen at a Credit Union
So what makes a credit union different from SVB? Its customer base. Credit unions are member-owned and primarily serve individuals that deposit less than a quarter of a million dollars.
While credit unions don’t receive FDIC protection, member funds are generally insured up to $250,000 by the National Credit Union Administration. (All federal credit unions and most state credit unions offer this coverage.) That means the average credit union customer won’t have to worry about losing their money even if their institution becomes insolvent.
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Thinking About Joining a Credit Union?
If you’re thinking about moving your cash, ask these questions before choosing a credit union:
- Can I join? (Credit union membership is often tied to your city of residence, profession, employer or other criteria.)
- What types of accounts are offered?
- Can I manage my accounts online?
- What are the current interest rates on available financial products?
- Where are the credit union’s ATMs located?
- What special perks do I get for being a member?
To save you some research time, we’ve compiled a list of the best credit unions on the market.
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