Despite the decrease in bank failures last year, a recent voter survey conducted by the Credit Union National Association shows that more consumers believe credit unions are safer than banks. When asked what type of institution was the most financially safe and sound, here’s how voters responded:
- Credit unions — 40 percent.
- Banks — 34 percent.
- Both — 19 percent.
Seven percent of respondents either didn’t know or answered “neither.”
I traded notes with Pat Keefe in CUNA’s press relations department, and he highlighted the significance of these results based on past results of the same survey. Just how far has the banking industry fallen in the public’s eyes due to bank safety concerns? In 2008, 72 percent of respondents believed that banks were the most financially safe and sound institutions. That’s a four-year decrease of a whopping 38 percent.
It turns out the numbers support the public perspective, too. Last year, 92 banks failed versus just 16 credit union failures.
The reality is credit unions and banks are basically the same when it comes to the safety of your hard-earned dollars. Both types of institutions offer members and account holders insurance on their funds (up to $250,000) in the worst-case event of an institutional failure. Sure, both can fail, but as long as you’re under the insurance limits, your money is safe.
However, that doesn’t downplay the importance of the survey’s findings. The public has had plenty of reasons to be angry with the banking industry recently — abusive lending practices, debit card fee tests and a whole host of PR nightmares — and these findings show that anger is transforming into complete distrust. My guess is bank safety will continue to be a hot topic as we all hear reports of American banks’ exposure to default risks in Europe. While the Federal Deposit Insurance Corp. has taken steps to increase consumer confidence, the outbreak of bank failures amidst a recession and a slow economic recovery has plenty of account holders on edge.
If you want to know how your institution is performing, Bankrate’s Safe and Sound Rating System offers an easy way to understand whether you have a real reason to be concerned about a potential failure.
What do you think? Where do you feel best about keeping your money?