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Credit unions

Got this nice note this morning. It's an important reminder.

For Chris: I'm a regular listener and appreciate your work. Just a reminder that when folks are looking for safe deposits, equivalent to a bank with FDIC insurance would be a credit union with NCUA (National Credit Union Administration) insurance. It has the same full faith and credit backing of the federal government, $100,000 limit per account and multiple account structure as FDIC. Virtually all credit unions have this federal coverage. Depositors can look for the blue NCUA logo in the lobby or on a website. Thanks. Bill Hampel, Chief Economist, Credit Union National Association

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Chris Farrell is the economics editor of Marketplace Money.
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Is there anyway to check how safe the credit union is?

David

I couldn't agree more! I've belonged to a credit union for 30 years. When my friends talk about paying fees at banks for things like withdrawing their own money at the teller, I shake my head. I don't even pay an ATM fee, so long as I use one owned by ANY credit union (they belong to a network)...even if I'm traveling in Canada. And I haven't heard of any Credit Unions going under in the current mortgage scandal.

In reference to all credit unions are federally insured, from what i hear that is not the case. It seems the credit union i deal with is not directly insurance by NCUAA. After calling what i found out is my credit union is insured by American share insurance. They said that they are funded by credit unions and in case of failure they order is as follows: 1)retained earnings 2) reserves 3) deposits 4) NCUAA backing.

My point is if there systematic failure the form does not help as unlike fdic which is the first resort, NCUA backing last.

So there is difference between federal backed credit union and self insured atleast from what i have been told

All federal credit unions must be insured by the National Credit Union Share Insurance Fund. But not all credit unions are federal--like yours.

The NCUSIF is the equivelent of the FDIC.

I've posted excerpts on the federal credit union fund before. Here are some highlights taken from NCUA website.

"The shares in your credit union are insured by the National Credit Union Share Insurance Fund (NCUSIF), an arm of NCUA. Established by Congress in 1970 to insure member share accounts at federally insured credit unions, the NCUSIF is managed by NCUA under the direction of the three-person NCUA Board. Your share insurance is similar to the deposit insurance protection offered by the Federal Deposit Insurance Corporation (FDIC).....

Credit unions that are insured by the NCUSIF must display in their offices the official NCUA insurance sign which appears on the cover of this brochure. All federal credit unions must be insured by NCUA, and no credit union may terminate its federal insurance without first notifying its members.

Here are some important facts to remember about your share insurance:

Not one penny of insured savings has ever been lost by a member of a federally insured credit union. The federal insurance fund has several programs to help insured credit unions which may be experiencing problems. Liquidations or failures are a last resort. If a federally insured credit union does fail, however, the NCUSIF will make any necessary payouts to the credit union’s members. These payouts are usually done within 3 days from the time the credit union closes its doors.

As a member of an insured credit union, you do not pay directly for your share insurance protection. Your credit union pays into the NCUSIF a deposit, and an insurance assessment, based on the total amount of insured shares and deposits in the credit union. Insured credit unions are required to deposit and maintain one percent of their insured shares and deposits in the NCUSIF. The NCUSIF is backed by the full faith and credit of the United States government.

Most properly established share accounts in federally insured credit unions are insured up to the Standard Maximum Share Insurance Amount (SMSIA), which is $100,000 as of April 2006, but may be increased in the future. Recent legislation has increased the insurance coverage on certain retirement accounts, such as IRAs and Keoghs, up to $250,000. Generally, if a credit union member has more than one account in the same credit union, those accounts are added together and insured in the aggregate. There are exceptions, though. You may obtain additional separate coverage on multiple accounts, but only if you have different ownership interests or rights in different types of accounts and you properly complete account forms and applications. For example, if you have a regular share account and an Individual Retirement Account (IRA) at the same credit union, the regular share account is insured up to $100,000 and the IRA is separately insured up to $250,000. However, if you have a regular share account, a share certificate, and a share draft account, all in your own name, you will not have additional coverage. Those accounts will be added together and insured up to $100,000 as your individual account. Additionally, shares denominated in foreign currencies are insured as outlined in NCUA Rules and Regulations.

Coverdell Education Saving Accounts, formerly education IRAs, are insured as irrevocable trust accounts and will be added to a member’s other irrevocable trust accounts and insured up to the SMSIA. Roth IRAs will be added together with traditional IRAs and insured up to $250,000.

Additional coverage is available on revocable trust or payable on death accounts. You can now name a parent or sibling as a beneficiary to get separate coverage. Previously, beneficiaries had to be a spouse, child or grandchild.

The rules on joint accounts have been simplified. A co-owner’s interest in all joint accounts in the same credit union will be added together and insured up to the SMSIA."

Check it out at www.ncua.gov.

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