Credit Unions (opens in new tab)

Mine does not offer better investment/loan rates, but they do definitely offer better services and lower fees.

My wife banks with one of the big banks--pretty much everything she tries to do is a hassle. Often that involves long hold times only to be told she needs to travel into town to a branch to get something done or resolved. That's, more than once, been the point where they just outright refuse to actually help her. She pays $20/mo+ for the privilege.

I never wait on hold. Everything I've needed to do I can do online or via phone/email. When my wife's bank steadfastly refused to allow her to send me a wire transfer, my CU was the one that was willing to discuss alternatives and help us figure out how to get the money moved. When I had bad credit but had repaired my financial situation, my CU was the one that was willing to extend me credit based on the personal assessment of a real human. I've paid them $0 in fees in the last decade or so.

My wife's been telling me to get a "real bank account" for years because my CU has been halfway across the country in one direction or another most of the time we've been together and has no local branches. She still can't seem to grasp that it's not a problem when your bank is actually staffed by actual people empowered to make stuff happen. Her "real" bank on the other hand...

I've used Credit Unions my whole adult life and agree with you. Though I am now in a position that they don't work as well for me: living abroad. I've run into lots of small issues over the last few years so I caved and opened an account at a commercial bank for the first time to help decrease the friction.

Only 300,000 depositors lost access. Considering the population of the United States as a whole, this seems like a pretty isolated and small incident, when you compare it something like the 2008 failure.

What makes you think this is sufficient evidence to claim that they are no more safe than banks?

Have there been other CU failures of note since 1990? (33 years ago)

I’m actually curious about your claim that they’re just as risky as banks. Is this true? Or are you just indicating that it’s at least possible for a credit union to go bad?

Credit unions failed all over the US in the late 1980s. In general it was badly managed loans, but there were cases of self-dealing. The then governor of Maryland, Harry Hughes, was doomed when it came out that he had a year or two earlier received a report predicting exactly what then happened, but had taken no steps to prevent the crisis. He lost in the Democratic primary.

Many of the credit unions I've looked at don't allow commercial accounts. There's not a whole lot of need for people to hold more than the deposit insurance amount in one institution, whereas it does make sense for many companies. If more of the deposits are covered by deposit insurance, I think there's less of a risk of a bank run --- I wouldn't try to get a significant amount out of my accounts even if I knew the credit union was going to fail, because I know I can get it all on the Monday after it fails; guaranteed by NCUA, backed by the US Government. Still, I think a significant run would likely cause the credit union to fail, it's not easy to provide 20% of deposits on one day.

Some credit unions do provide service to businesses though. So they might have similar concentration of account issues.

> It might be more stable for the sheer fact of being very local

Being very local (and concentrated on one sector) didn't help SVB. Most credit unions require (or used to) you to be in some industry or union, etc to join. Like teacher's credit unions, etc. So potentially there would be sector exposure. But I think in recent years most CUs have relaxed those requirements (I know the one I'm in did) and allow pretty much anyone to join.

It seems possible any deposit-taking financial institution could have made the same mistake as SVB, be they a bank or credit union or anything else. I don't think merely being a credit union will shield them from this. They may have some by-laws though that do protect them, but that's on a case-by-case basis.

I remember reading credit unions were significantly less likely to go bankrupt than banks during the 2008 meltdown. In fact:

> From 2008 through 2012, 481 FDIC insured banks were either liquidated or merged with healthier institutions. Credit unions, on the other hand, saw 136 involuntary liquidations or assisted mergers at the hands of the National Credit Union Share Insurance Fund (their version of the FDIC), among 6,940 FDIC institutions compared to 6,815 U.S. credit unions.

> frankly I could not tell you whether it's more or less vulnerable to market instability or bank runs than a larger bank

For starters, there is not a conceivable credit union equivalent to VCs telling all their companies to withdraw all they can from their bank on a single day. Credit unions can offer business accounts as well as individual accounts... but still.

I would think if a bank if FDIC and you have less than 250k there, you would be fine.

Not FDIC insured is a big one.

Why bother when they have political muscle and financial size such that everyone is forced to pay for their now-unlimited FDIC limits?