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The Resource Center Credit Fraud & Credit Monitoring | post

In matters of security, is a small credit union a safer bet than a large bank?

by Neal O'Farrell on

In today’s post, Intersections’ Consumer Security Adviser Neal O’Farrell examines the issue of bank security. Are you safer with a small credit union or community bank? That's a question that's increasingly being asked by consumers around the country who are considering moving their bank accounts from a large bank to a smaller credit union or community bank.

According to a recent article in, risk is the top concern as consumers consider moving their accounts from larger banks to credit unions or community banks. The article points out that at least 650,000 Americans have switched to credit unions since Sept. 29, 54 percent of credit unions have reported increases in share growth, and one of the largest credit unions said its new members and checking-account openings are up 70 percent for the months of September and October.

And credit unions aren't alone. The same article pointed to a recent poll by the Independent Community Bankers of America which found that 60 percent of community banks had picked up new customers as a result of frustrations associated with larger banks.

If you are thinking of switching from a larger financial institution, or from a bank to a credit union, security should always be a concern. Once you've done a side-by-side comparison on key features like account fees and features, loan and credit card interest rates, ATMs locations and fees, and customer service, it's time to think about security.

There is a concern that many smaller financial institutions are still struggling financially, and may not have enough of a security budget to match that of a larger institution. And if they're lucky enough to be swamped by new customers, will their security budget and preparedness be able to keep pace?

Those are the most common security questions. Can a credit union really protect me — not just my money but all my personal information too? How good and quick are they at detecting a security breach and notifying me? How quickly can they resolve a security issue or fraud? And will my money be any safer there than at a large bank?

Credit unions have long argued that history shows they suffer from fewer attacks than larger banks. Experts on the other hand have argued that's only because of their small size. It's like the Windows vs. Apple argument — Apple users claim Apple products have suffered from fewer attacks because they have better security built in, whereas experts argue it's just about economics. Hackers and malware writers simply ignored Apple for years because it had so few users compared to Microsoft. Writing code to target Apple products just wasn't economically viable — just not worth the time.

But as the popularity of Apple products has surged, thanks to iPhone and iPad, we suddenly started to see "Mac Malware" emerge and the malware authors just followed the crowds.

That's what I expect if there's a major shift from larger banks to smaller and more local banks and credit unions. The hackers will follow the crowds and I'm just not sure that smaller financial institutions are prepared for the risk exposure. Many are still struggling financially and have not been able to make the enormous and endless security investments the bigger banks have been making.

My recommendation? Before you make the big jump, talk to the financial institution you're thinking about jumping to. Create a list of the security features you may already enjoy, like two (or more) factor authentication, phishing and keylogging protection, account alerts etc. Then compare that to the security features being offered by your new home. At least with a smaller financial institution you're more likely to be able to meet a real person and get some real answers.

And make the move slowly, by opening up an account with credit union or bank but keeping your original bank account open for a while. At least until you've had time to test your new surroundings.

I think credit unions and community banks should also raise the security discussion themselves. Larger banks are notorious about staying tight lipped when it comes to security, worried that the more they talk about things like identity theft, the more their customers will worry. Whereas the opposite is probably true — talk more and customers worry less, because they know the bank is taking it seriously. Talk less and customers have a right to worry more, if the only people who don't seem to be worried about security are the ones who should be worried most.

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