The world’s been through a lot in the past couple of years. The pandemic, overseas military invasions, rising gas prices, increasing inflation rates and other unstable forces can affect people’s finances.
Also, as of summer 2022, the U.S. technically entered a recession. Understandably, many Americans are concerned about the stability of their money.
During times of recession, it’s normal to watch investment values drop as the economy contracts. Some people wonder where the best place to store their money is to protect its value amid economic uncertainty.
One way to ensure your money stays safe is to deposit it in a credit union. Credit unions protect members’ finances, whatever the market conditions are, including during a recession. Learn how a credit union can safeguard your finances during a recession.
What Is Considered A Recession?
The general definition of a recession is two consecutive quarters of economic contraction. That placed the U.S. in a recession in September 2022.
However, the National Bureau of Economic Research defines a recession as a significant decline in economic activity that lasts several months. If you experienced the Great Recession that began in 2007 and lasted through 2009, you might be questioning the severity of what we’re experiencing today and whether or not it’s really a recession. Economists are currently debating the issue, too.
In August 2021, a Reuters poll of economists found respondents said there’s only a 45% chance of a U.S. recession within a year and a 50% chance within two years. The poll also found respondents said if there is a recession, it will be shallow and short.
Whatever is happening in the market today, financial markets are never predictable long-term. It’s helpful to know your options in case the country does experience a recession that’s as severe or worse than ones that have happened in the past.
Are Credit Unions Safe During A Recession?
During the Great Recession, the net worth of U.S. households and nonprofit organizations decreased from $69 trillion in 2007 to $55 trillion in 2009, according to Federal Reserve History. Many American families watched their wealth plummet in their retirement and investment accounts, while unemployment rates rose during this period.
Stocks, mutual funds and other investments aren’t guaranteed in a recession. But money held in a federal credit union, and most state-chartered credit unions, is protected.
Credit unions are regulated by the National Credit Union Administration (NCUA), the federal insurer of credit unions. Federally insured credit union deposits are insured up to at least $250,000 per individual depositor, according to the NCUA. That includes money in:
Any insured funds are typically available to members within a few days if a credit union closes. If an individual has more than $250,000 at a single credit union, additional share insurance coverage options are available. These include coverage for:
- Retirement accounts, including traditional and Roth Individual Retirement Accounts (IRAs) and KEOGH retirement accounts
- Joint accounts
- Trust accounts
- Revocable trusts
- Irrevocable trusts
Coverage for credit union accounts is provided by the National Credit Union Share Insurance Fund (NCUSIF). Talk with your credit union about what options are available to you.
Individuals with more than $250,000 to deposit may also choose to deposit money among several credit unions. That way, they can ensure all their funds are within the insured credit union limits.
Are Credit Unions Safer Than Banks During Recession?
Banks, like credit unions, are also federally insured and protect depositors’ money. The Federal Deposit Insurance Corporation (FDIC) protects bank money similarly to how the NCUA protects credit union members’ deposits.
The FDIC provides bank deposit coverage for up to $250,000 in individual accounts and $250,000 per owner in joint bank accounts for products including checking and savings accounts, money market accounts and CDs. If a bank closes during a recession, the money is typically transferred to another bank with FDIC insurance, or the former bank member will receive a check for the fund amount.
However, there are some key advantages to depositing money in a credit union rather than a bank. For example, in 2021, CNBC reported credit unions tend to lend more in loan amounts compared to commercial banks during recessions. Since credit unions’ missions are to serve their local communities, they’re more likely to be in your corner during economic uncertainty compared to a big national bank.
Also, a 2022 report by the Ascent stated research shows credit unions are less likely to fail compared to banks during recessions. If you want a financial partner that you’re more likely to be able to stick with long-term, even during economic uncertainty, credit unions tend to fare better than banks.
Keep Your Money Safe With Arizona Central Credit Union
Recessions can be stressful, especially when you’ve accumulated savings you want to rely on in the long run. When you deposit money with a credit union like the federally insured Arizona Central Credit Union, you can rest assured that your deposit of up to $250,000 is completely protected, no matter the economic conditions. If you want to deposit more money in other types of accounts, you may have additional options for coverage.
Learn more about Arizona Central Credit Union’s banking products. Contact us if you have any questions about our credit union and how we can serve you. We’re here to help.
