Banks or Credit Unions: Which Are Safer?

by Gene Kirsch | October 3, 2011

Now that we’ve completed the second quarter 2011 ratings for both banks and credit unions, it’s a good time to think about the safest place to put your money. 

Is a bank the safest haven or is the credit union down the street a better alternative?   You want some assurance that you’re going to get the service you want and your nest egg is going to be safe and sound.  But like most things, in banking there are differences and tradeoffs. 

Since credit unions are owned by their members, they tend to be more customer focused, offering better rates on loans and other services. But they may have fewer locations and a smaller network of automatic teller machines (ATM’s) making it less convenient to visit and transact business with them.  And they may have a more limited selection of loan or savings products to choose from.

On the other side, most banks tend to be more profit oriented, offering less competitive rates.  They may have a wider array of services and a larger service area making it easier to find a branch or ATM near your home, work and even when you’re traveling.   

The lists below highlight some of the strengths and weaknesses of each institution type:

Banks Credit Unions
Strengths Weaknesses   Strengths Weaknesses
  • Larger in size
  • Convenience
  • Selection of products
  • Service
  • Interest rates
  • Higher expenses
  • Service
  • Interest rates
  • Lower expenses
  • Product selection
  • Convenience
  • Smaller in size

You have to remember that there are exceptions. Some of the larger credit unions offer more products and locations, and some banks have more favorable interest rates or service.  But in general, the typical bank or credit union will reflect these attributes. 

Next, consider the table below, which lists the overall industry percentage totals of strongest and weakest banks and credit unions. 

Strongest Q2 2011 Q1 2011 Q4 2010
Banks 11.1% 11.3% 11.7%
Credit Unions 10.5% 10.0% 9.7%
Banks 30.3% 33.9% 35.6%
Credit Unions 31.8% 32.2% 34.7%

Percentage wise, there are fewer strong credit unions than banks.  But the gap is narrowing with definite improvement in credit unions attaining financial strength in the second quarter of 2011.  But that doesn’t mean your particular credit union is among the strong or the weak — you’ll have to check the ratings and see for yourself. 

And both banks and credit unions saw a decrease in the number of institutions falling within the weakest range. Indeed, good news. Still, a large number of institutions, almost a third of all Weiss rated banks and credit unions, fall within the weakest range of financial strength. So you do need to look carefully at the financial health of any institution you consider.

Once you’ve determined which of the criteria are most important to you, the next thing to do is check which local institutions are the safest in your area.  So whether it’s a bank or a credit union, make your pick based on the service and product array you want and the financial strength of the institution ... always keeping in mind that financial strength should weigh heavily in your decision.  

To review individual bank and credit union performance, see Weiss Ratings’ complete lists of the strongest and weakest banks at

Gavin Magor

Gene Kirsch, senior financial analyst at Weiss Ratings, has more than 20 years of financial industry experience in credit-risk management, commercial lending and loan review analysis within various sized credit unions, finance companies and banks at both the retail and commercial level. He leads the firm's bank and thrift ratings division and developed the methodology for Weiss' credit union ratings.