Monday, July 21, 2008

Your credit union accounts are safe, insured

MADISON, Wis. (7/21/08)—Credit unions remain a safe harbor for your savings and other accounts, despite economic woes, including the recent IndyMac bank failure. Thanks to federal insurance—members' shares are backed by the full faith and credit of the U.S. Treasury (CUNA Center for Personal Finance).

There's no better time to be a credit union member. Virtually all credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF), which insures savings of at least up to $100,000 per account. Certain retirement accounts such as IRAs and Keoghs benefit from additional coverage of up to $250,000. For the fewer than 170 credit unions with private deposit insurance, their equity ratio typically is even higher than the federal fund, and state regulators oversee these privately insured credit unions.

NCUSIF's equity-to-insured deposits are estimated at a strong 1.24% as of June 30 and projected to increase to 1.28% by year-end, according to the National Credit Union Association (NCUA).

Credit unions are nationally recognized for having steered clear of the subprime mortgage mess by lending responsibly and holding more of their mortgage loans—roughly 70%—in their portfolios instead of selling them on the secondary market to beleaguered Fannie Mae and Freddie Mac. Also, credit unions have a better capital-to-asset ratio—11.1% compared with 10% for banks.

What does share insurance coverage mean for you?

If you have more than one single-ownership account in the same credit union, all those account balances are added together and insured in the aggregate, to the maximum of $100,000.

If you have a joint account at the same credit union, that account is insured separately from your individual account up to the $100,000 level, provided each of you has personally signed an account signature card and each of you has a right of withdrawal on the same basis. Each individual's interests in all jointly held accounts are added together and insured up to $100,000;

If you have accounts at more than one insured credit union, you have coverage up to the full insurable amount in each credit union. If your credit union has one or more branches, the main office and all branch offices are considered as one credit union;

If you have a revocable trust account, such as payable-on-death, living trust, or testamentary account, insurance coverage for each account is up to $100,000 per owner for each qualified beneficiary; and

While IRAs and Keogh accounts are insured separately from nonretirement funds, with each type insured up to $250,000, funds in traditional IRAs and Roth IRAs are added together and insured in the aggregate up to $250,000. Coverdell Education Savings Accounts are treated as irrevocable trust accounts and added in with your other irrevocable trust account funds and insured separately up to $100,000.

Bottom line: Depending on how your accounts are established, funds in a federally insured credit union can be insured to a level much higher than $100,000. For more information about the specifics of your insurance coverage, visit with the professionals at the credit union.
For more information, read, "Credit Union ... Bank ... What's the Difference?" in Home & Family Resource Center.

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