It’s no secret that the economy has seen better days. Inflation has cooled off slightly, but it is still at record highs as salaries continue lagging behind. Interest rates on large loans are also steep enough to drive many would-be borrowers away, while home and auto prices soar. 

During times of financial uncertainty like this, it’s normal to be worried about the safety of your own money. Naturally, you want to be absolutely sure your own savings will be secure, even in times of financial crisis. 

Credit unions offer unique advantages that can provide greater security and peace of mind during financial downturns. Here’s why a credit union can be a better choice than a bank during a financial crisis.

Member-owned and -operated

One of the primary differences between credit unions and banks is their ownership structure. Credit unions are member-owned cooperatives. This means that, when you open a share account at a credit union, you become a part-owner of the institution. In contrast, banks are typically owned by shareholders who may not even be customers of the bank. 

During a financial crisis, this member-owned model can work in your favor. Credit unions prioritize the needs and interests of their members instead of focusing on maximizing profits for shareholders. This often translates into more personalized, and empathetic, service and policies that aim to support members through tough economic times.

Nonprofit status

Credit unions operate as not-for-profit organizations. Unlike banks, which seek to generate profits to pay dividends to their shareholders and boards of directors, credit unions reinvest any surplus earnings back into the institution (and thereby, the member-owners, like you). This reinvestment can take the form of lower/fewer fees, better earnings rates on share accounts and lower loan rates. 

In times of financial crisis, these financial benefits can be crucial. Lower fees and better rates mean you can keep more of your money and reduce the cost of borrowing. This can be especially beneficial if you need a loan to manage financial difficulties or if you want to maximize the returns on your savings.

Greater stability and lower risk

Credit unions and banks are both insured, with most banks being insured by the Federal Deposit Insurance Corporation (FDIC) for up to $250,000 per customer. Most credit unions are similarly insured by the National Credit Union Administration (NCUA) for up to $250,000. Many institutions including Climb are also privately insured for additional amounts. Our Excess Share Insurance covers members for an additional $250,000 beyond the $250,000 covered by NCUA. However, large banks are more likely to have customers with large deposits that fall well beyond the insured amount. This can leave banks in a troublesome scenario if many wealthy customers withdraw their uninsured funds during a financial crisis.

In addition, credit unions tend to take lower risks compared to banks. They maintain conservative lending practices and focus on member services rather than profit. Because they are not driven by the same profit motives, they may be less exposed to risky financial behaviors that can lead to instability.

Focus on financial education

Credit unions often place a strong emphasis on financial education and literacy. They provide resources and counseling to help members make informed financial decisions. During a financial crisis, having access to sound financial advice can be incredibly valuable.

Banks, on the other hand, may not prioritize financial education to the same extent. Their focus on profit generation can sometimes overshadow the importance of helping customers understand and manage their finances effectively.

Stronger community ties

Credit unions are typically community-focused institutions. They often have strong ties to the local areas they serve and a deep understanding of the specific financial needs of their members. This community focus can translate into more tailored and supportive services during a financial crisis. For example, a credit union might offer specialized loan programs or deferment options to help members affected by local economic downturns. This community-centric approach ensures that the credit union’s policies and initiatives directly address the challenges faced by its members.

Personalized service

Having access to personalized, empathetic service can make a significant difference in a financial crisis. Credit unions, with their smaller size and member-focused approach, are often able to provide more personalized service compared to large, impersonal banks. In addition, credit union staff is typically more accessible and willing to work with members on an individual basis to find solutions to financial problems. This can include negotiating loan terms, offering flexible repayment options or providing financial counseling.

Better loan terms

Credit unions typically offer more favorable loan terms compared to banks, which can be particularly advantageous during a financial crisis. Lower interest rates, reduced fees and more flexible terms can make it easier to manage debt and maintain financial stability. For example, if you need to consolidate debt or take out a loan to cover unexpected expenses, a credit union is likely to offer better terms than a traditional bank. This can help reduce the financial strain and make repayment more manageable.

If you’re worried about a financial crisis, rest assured, your money is safe with us here at Climb Credit Union.