In the last few months, the global financial landscape has witnessed several unsettling events, including the collapse of prominent banks that have shaken public trust in the traditional banking system. The aftermath of these failures has left many individuals questioning the security and reliability of their financial institutions. However, amidst this uncertainty, credit unions have emerged as a compelling alternative. Today, we'll explain how recent bank failures have illuminated the advantages of credit unions, positioning them as a safer and more customer-centric option for consumers.
Stability and Member Ownership:
One of the most significant differentiating factors between banks and credit unions lies in their ownership structures. Banks are typically owned by shareholders who prioritize profit-making, often at the expense of their customers. In contrast, credit unions are member-owned, meaning their primary focus is on serving the best interests of their members.
Recent bank failures have demonstrated that shareholder-driven banks can fall prey to risky investments and questionable practices, which can jeopardize the financial security of their customers. “The main reason behind the recent bank failures is that they're larger banks, and they're normally not very well diversified banks. The first big bank failure in March had technology investments,” said Clay Beardemphl, Chief Financial Officer of ALLIANCE. “The banks that have failed recently weren't very diversified in their loan portfolios or deposits. Diversification is a huge deal, as well as the concentration of the funds.”
Credit unions, on the other hand, operate with a member-first mentality, as each member holds a share of the institution and has a say in its operations. This democratic ownership structure promotes financial stability and ensures that the interests of the members are protected.
Community-Centric Approach:
While banks often have a global, national, or state-wide presence, credit unions are rooted in local communities. This localized focus allows credit unions to have a better understanding of the unique needs and challenges faced by their members. The recent bank failures have underscored the importance of community-oriented financial institutions that prioritize personalized services and strong relationships with their customers.
Credit unions frequently offer lower fees, competitive interest rates, and favorable loan terms, benefiting members in a more tangible way than many banks do. “Credit unions are more driven to consumer products to the individual consumer. ALLIANCE has more individual accounts, personal accounts, personal loans, car loans and smaller house loans. Banks, on the other hand, focus on corporate deposits.” said Beardemphl. “If a business decides to pull that money out, then you're losing a whole whole lot at once.”
Additionally, credit unions often invest their profits back into the community through initiatives such as scholarships, grants, and affordable housing programs. By fostering economic growth and financial well-being at the local level, credit unions demonstrate their commitment to the communities they serve. ALLIANCE and the ALLIANCE Credit Union Foundation donates to local charities, grants scholarships to area students, and employees volunteer every month to improve the community.
3. Robust Member Protection:
Another crucial advantage of credit unions is their commitment to member protection. Recent bank failures have exposed the vulnerabilities of banks in safeguarding customer deposits during times of financial distress. However, credit unions have a strong track record of protecting member funds and ensuring the safety of their deposits.
Some credit unions are federally insured by the National Credit Union Administration (NCUA) in the United States, and others are privately insured. This provides deposit insurance similar to the Federal Deposit Insurance Corporation (FDIC) coverage offered by banks. This insurance guarantees that members' deposits are protected up to a certain limit, offering peace of mind and security.
“With the first major bank failure in March, 92% of their deposits were not under that $250,000 FDIC insurance, meaning 92% of their deposits were not insured,” said Beardemphl. “Whereas almost every deposit at ALLIANCE is privately insured. Less than 1% are not insured, since they’re over the $250,000 amount. When your money is insured, you're not as worried about it.”
4. Customer-Centric Service:
Customer service is a fundamental aspect of any financial institution. While banks are notorious for their bureaucratic processes and impersonal interactions, credit unions prioritize building meaningful relationships with their members. The cooperative nature of credit unions enables them to provide highly personalized service and tailored financial solutions.
Credit unions often have fewer customers than large banks, allowing them to offer a more individualized approach to each member's financial needs. They take the time to understand their members' goals, financial situations, and provide guidance accordingly. This level of personalized service creates a sense of trust and loyalty that is often lacking in the banking sector.
In a new era marked by the failures of major banks, credit unions have emerged as a compelling alternative that offers stability, community focus, member protection, and superior customer service. Recent events have highlighted the advantages of credit unions, showcasing their ability to provide secure financial services with a genuine concern for their members' well-being, and that is the Credit Union Difference.
If you are seeking a reliable, community-oriented financial institution that puts your needs first, look no further than ALLIANCE Credit Union. Become a member today!
