Credit unions are a popular way to save and invest to achieve important financial goals. Although they are not the same as banks, these institutions offer similar products and services. Regardless of which type of institution you choose, you still want to know that your money is safe. Let’s discuss how a credit union protects you and your money so that you can save and invest with confidence.
Is Your Money Protected in a Credit Union?
Your local credit union is a safe place for your savings. While banks are insured by the FDIC, credit unions are insured by the National Credit Union Share Insurance Fund (NCUSIF), which is backed by the full faith of the US Treasury. The NCUSIF is administered by the National Credit Union Administration (NCUA).
The NCUA covers federally-insured credit unions from failure until the NCUSIF is exhausted. Even then the US government promises to come up with any funds needed to replace your savings.
You may be wondering how the federal government can raise funds to fully back credit unions. This can be done in several ways including raising taxes. The good news is that not a single penny of insured savings has ever been lost by a member of an NCUA-insured credit union.
What’s the Value of the Insurance Coverage?
The NCUSIF insurance provides insurance coverage of up to $250,000 per member, per separate account type in each credit union. You should ensure that your funds are held in different ownership categories.
So if you have an IRA and a checking account at a credit union, then you will have more than $250,000 of insurance coverage. You can figure out where you stand with the NCUA’s Share Insurance Estimator.
Even though you may have greater insurance coverage, you may want to spread your funds across different account registrations and different institutions.
What Does It Mean to be Federally Insured?
The safest credit unions are those that are federally-insured. Almost all credit unions in the USA are federally-insured, but we recommend that you always check that fact with the NCUA. If a credit union’s name includes the word “federal”, then it is likely to be federally insured. Therefore, Riegelwood Federal Credit Union is covered by the NCUSIF, and all members’ funds are protected.
However, some credit unions are not federally insured. In such cases, these institutions may be safe, but they are not backed by the US government. If you choose to save funds in such credit unions, then the safety of your funds depends on how the specific credit union operates and if there’s private insurance in place.
If you’re not sure about the safety of your credit union, then you need to ask questions. Don’t be afraid to investigate share insurance and which institution provides that coverage. Privately-insured credit unions are not necessarily bad, you just need to be aware of the risks of saving your funds with them.
What Accounts Are (and Are Not) NCUA Insured?
Credit unions are a safe place to save your cash and near-cash assets. NCUA insurance covers all:
- Checking accounts
- Savings accounts
- Money market accounts (not money market funds)
- Certificates of deposit (CDs)
- IRAs held in share accounts at that credit union
Now, what accounts are not NCUA insured? Well, these include (but are not limited to):
- Mutual funds, Stocks, and ETFs
- Annuities and other insurance products
- Safety deposit box items
- Other investment vehicles
Responsible Financial Management
Your credit union can help you with responsible financial management. Credit unions usually offer higher interest rates on saving accounts and lower loan rates in comparison to most banks.
Also, credit unions tend not to engage in predatory lending practices like offering subprime loans or payday lending programs with usurious rates and fees.
Credit unions are also conservative in their investment practices which means that they are not likely to engage in risky financial behavior. So you can expect that your credit union will put the needs of its members first.
Financial Guidance Programs
Credit union staff are often trained in programs that help them to teach credit union members about basic financial skills. This helps members to have a good foundation on which to effectively plan their financial futures.
Furthermore, many credit unions and their state associations cooperate with other non-profit organizations to teach customers why they should avoid predatory lending programs.
However, credit unions also provide other valuable services such as:
- School visits and opening in-school branches
- Financial planning seminars
- ID theft prevention best practices
- Other staff interactions that serve to educate the public
Three Ways to Protect Your Credit Union Deposits
Watch Out for the Red Flags
A failing credit union is likely to pay lower deposit interest rates and/or offer low-quality service. On the other hand, strong credit unions often offer lower loan rates and higher deposit rates.
The good news is that since credit unions are owned by their members, they tend to be more transparent than banks. So it’s easy to check their annual reports and financial statements each month.
You can also research your credit union’s financial state by visiting the NCUA website.
Keep Your Deposits Below the Insurable Limits
Since the NCUA insurance only covers up to $250,000 per member, per separate account type in each credit union, then you need to monitor your deposits. We recommend that you don’t go above the limit as it will be difficult to get back more than your federally-insured limits in the event of a credit union failure.
Have a Plan in Place to Deal with any Possible Failures
The good news is that few credit unions have failed in recent times due to strict regulations and also conservative investments on the part of credit unions.
But, it’s still good to have a plan in place. Generally, if a credit union fails, one can wait for three months before deciding to switch to another institution. This is the time frame for a failed credit union to be taken over. However, all members will be informed every step of the way.
You should note that the new credit union will likely have different policies and procedures. You need to consider certain facts about the new entity. These include the number of branches that it has; if it has products that you’re interested in; and if your banking and financial needs are being met. If you decide to stay on, then be sure to monitor the financial health of the new credit union.
How to Keep Your Money Safe During a Recession
The reality is that economic downturns will happen. And that means that you need to make sure that your deposits are safe. Bank deposits tend to be highly taxed with exorbitant fees, as well as low-interest rates. So in times of uncertainty, a credit union could be your best option.
Why You Should Join a Credit Union
You’ll first need to join a credit union to have a safe place to keep your funds and where you’ll likely experience better customer service. The best thing? Credit unions have lower loan rates, higher deposit interest rates, and low fees. You may also be able to complete transactions at other credit unions.
You May Want to Close Your Bank Accounts
Once you’ve switched your funds to a credit union, you can choose to close your bank account. Credit unions also have several investment products that can help retain your money’s value.
We also recommend investing in physical assets to guard against inflation, such as precious metals like gold. You can also buy shares in companies that invest in precious metals or are involved in industries that tend to remain stable even in a recession. Share values are low during a recession, so you can capitalize on that fact by buying shares with the aid of a financial adviser. Mutual funds and ETF funds are also other investment options to explore.
Start a Home-Based Business
Yes, a recession is a good time to start a home-based business when you have the time to do so. You can reinvest your money back into your business. If you incorporate your business, then you can take advantage of several tax breaks and save yourself a lot of dollars that would have been lost forever in taxes!
Not only does giving benefit your wellbeing, but it can also be a lifesaver for others who are facing the challenges of the recession. You can set up a charity or a foundation to donate money. The other good thing is that you get a tax deduction for giving back, which helps the recipients of your generosity and you as well.
Riegelwood Federal Credit Union is Your Safe Place
Now you know how a credit union protects you and your money. Riegelwood Federal Credit Union is NCUA insured, so you know that your funds are safe with us. We also have a suite of interesting products for your entire family. Contact us today to learn how you can join Riegelwood FCU and get on the journey to financial growth and independence for you and your family.