Credit Unions and the Economy - In Simple Terms…
September 25, 2008

If you have accounts with a Credit Union, you’re ahead of the game. You see, Credit Unions have the advantage in these economic circumstances. The recent news coverage of the financial “bailout” of these large banks can make any of us a little uneasy, even if you don’t have hundreds of thousands of dollars in your accounts. The good news is most Credit Unions are safe. Sure a few Credit Unions have failed, no one is perfect, but compared to the staggering number of banks that have failed, Credit Unions are looking pretty good right now.

What most people don’t realize is that Credit Unions are in fact insured. Credit Unions are insured by the National Credit Union Share Insurance Fund (NCUSIF), the government’s version of the FDIC for Credit Unions. Any account that you have with your Credit Union is now insured up to $250,000 by the NCUSIF, and if it’s an IRA account, you’re insured up to an additional $250,000.

Now back to the banks. Interestingly enough, during the Great Depression, Credit Unions were the only financial institutions to show significant growth while banks all over the nation were closing. The reason why Credit Unions were so successful during a period of great recession still rings true today: as not-for-profit financial cooperatives, Credit Unions continually invest in their members and provide service levels not generally found at other financial institutions.

Now you might be saying to yourself “Credit Unions have survived just by providing good service? Yeah right!”. But take a look at the first part of that sentence, “Credit Unions continually invest in their members…”. Where do banks “invest”? (certainly not in their customers) That’s right, their stockholders. Banks have to pay their stockholders first. Credit Unions don’t have stockholders, heck they don’t even have a paid board of directors! (Talk about eliminating the bias) Without stockholders to pay, Credit Unions can return more of their profits directly to their members. See the illustration below:

So, to sum it up, the reason Credit Unions have the advantage in these times of economic uncertainty, is not only the fact that Credit Unions are conservatively managed, and have avoided such practices as high-risk lending, but simply, We care. We’ve always cared. We will continue to care.

Banks have been after Credit Unions for years…74 years to be exact. As soon as President Roosevelt signed the Federal Credit Union Act in 1934 (which allowed Credit Unions to be organized under federal law), Banks have been fighting against our rights. Are we really that much of a threat to banks?

Then again…maybe we are. After 100 years of continued prosperity, Credit Unions are 90 million members strong, and still growing (with no lack of bankers in business suits fighting our not-for-profit status).

More information on Credit Unions and Today’s Economy

>> America’s Credit Unions: Secure, Strong

>> NCUA Share Insurance Estimator