Can credit union and coop banks replace traditional banks completely?
Edit (adding additional question): Has there been an attempt to do this on a national or societal level?
If you get paid via direct deposit and pay with everything via a card or a mobile app, a cu can replace your bank.
If you want complex investment options than I doubt all CU can do that, but I am sure there are some that can.
If enough retail depositors withdraw all their money and moved it to a CU I suspect they may trigger bank run limits which would cause other banks to preemptively limit withdrawals.
Thanks for the answer!
You mentioned paying for everything via card or mobile. Does that mean credit unions offer no options to withdraw cash?
Also can banks permanently limit withdrawals or transfers?
I’m going to answer the last part of the question, banks and credit unions and these institutions absolutely can, will, and do limit withdrawals. When you don’t physically hold your money and it is in an institution, it is no longer your money, it is an IOU with conditions that can be rescinded at any time for any reason.
Banks provide a lot more services than credit unions or building societies. Banks also provide B2B services. So there’s no scenario for everyone to move away from banks. I’d say that Britain has one of the most advanced financial markets with many different players like building societies, challenger banks etc, but traditional banks still have plenty of business to do. What usually happens here is that people actually use multiple service providers for different purposes. Having 5+ accounts is normal here.
Real scenario: you wouldn’t see that happen.
Hypothetically it could cause economic collapse because now there wouldn’t be money to back up all the loans that are outstanding. Followed by mass layoffs of people and all the other fun stuff that comes with it.
I’m not saying you’re wrong, just expressing my confusion: Don’t CUs also provide loans? Isn’t that their primary purpose?
CUs will issue anything that can help their maintain the required returns on the owners of shares (read: you). They can issue loans, but because they are not issuing on speculation but on a clear expectation of a return to the owners of the shares (read: you) they cannot loan as much. Your shares are the dollars in your account, the interest gained is the returns from loans.
These have to be guaranteed by someone, either the NCUA or another CU or bank. In fact, you can go to a Credit Union that doesn’t insure via the NCUA. I wouldn’t recommend it.
