Introducing Smart Savings
Feel secure knowing you’re federally insured up to $3 million – with a 1.51% APY.LEARN MORE
With the changing climate around big banks, more people are interested in learning about their banking options. Credit unions have been a banking alternative for more than 100 years. While they aren’t banks, they function in a similar way but as not-for-profit cooperatives.
People often ask “Should I put my savings in a credit union?” Older generations are sometimes wary of credit unions because they were not federally insured until 1970. These days, credit unions are safe and secure, having been insured by the government for over 50 years.
Credit unions are a popular place for savings accounts because they often offer more favorable interest rates on both loans and savings accounts. Banks operate on a for-profit basis and return their earnings to their shareholders who have invested in the bank while credit unions use a cooperative model to return earnings directly to their members through higher dividends and lower fees.
Aside from safety concerns, one of the biggest hurdles for people who are thinking about making the credit union switch is the idea of membership. What does credit union membership mean? Membership requires a common bond. That common bond is simply defined as the field or fields of membership the credit union serves. A credit union can have a Single Common Bond Charter that can be occupational or associational, or a credit union can have Multiple Common Bond Charters that could be both occupational and associational. DCU has many participating employers, organizations, communities, and condominium associations and this makes it simple for almost anyone to join. Explore DCU’s membership eligibility.
We mentioned earlier that credit unions have been insured by the federal government since 1970. While this is true, not all credit unions, or banks for that matter, are insured. Before joining any financial institution, it would be beneficial to research the types of insurance the financial institution has and the limits on coverage that may be in place.
Carefully regulated, credit unions typically have the same protections as banks, with a few differences. While banks are insured by the Federal Deposit Insurance Corporation (FDIC), credit unions carry their insurance through the National Credit Union Administration’s (NCUA) National Credit Union Share Insurance Fund (NCUSIF).
Credit unions are insured through the NCUA rather than the FDIC. The two organizations have similar roles and regulations, their main difference is the institutions they oversee. The standard share insurance covered by the NCUA is $250,000 through the National Credit Union Share Insurance Fund, which is similar coverage to what banks receive with the FDIC. Under the NCUA, each credit union member has at least $250,000 in coverage in individual accounts. Members’ interest in all joint accounts combined is also insured up to $250,000. The Share Insurance Fund also separately protects members’ IRA and KEOGH retirement accounts up to $250,000 and provides additional coverage for members’ trust accounts. In the past, insured funds have been returned to the members within days after credit unions close. Learn more about how your accounts are insured.
In short, the answer to the question, “Are credit unions safe from collapse?” is two-fold. The first part is a no. There are no financial institutions that are truly safe from collapse. The second part is more positive. Typically, money in savings accounts is insured up to $250,000. However, in DCU’s Smart Savings account the money you deposit will be federally insured up to 3 million dollars*.
If you have more money than is federally insured when a credit union goes under, you will not necessarily lose the money that’s not covered by federal insurance. Often, a credit union will be taken over by a another credit union. In that case, funds would be transferred to the surviving credit union. If that isn’t the case, the federal government may decide to refund your money in part or in full.
We all know that the financial sector can be vulnerable to cyber-attacks. Because of this, the NCUA has made cybersecurity one of its top priorities. Providing credit unions with guidance, education, and resources, the NCUA is continually improving credit union resilience.
As a credit union focused on protecting its members, DCU takes many measures to improve security both online and offline while still making everyday banking accessible. Here are some examples:
Yes! Most credit unions are insured like banks but by the NCUA. All federally insured credit unions will have the NCUA logo displayed on their website as well as where deposits are received.
Credit unions can offer competitive interest rates for loans and savings accounts. Their flexibility lies in their non-profit statuses and the fact that they’re owned by their members rather than investors.
DCU offers a variety of services to make it simple for its members to access their funds. From assistive technology to the services offered through digital banking such as text alerts and eStatements, DCU is all about making banking accessible, secure and simple.
You can check on the health of a credit union at any time. Make sure it’s federally insured and check up on its financial welfare by going to NCUA’s website. Clicking on “Credit Union Data” will give you an insight into the numbers standing behind the credit union you’re researching.
If you’ve read this far about credit union safety, you’re on the right track. It’s important to make sure your funds are in good hands. Are you interested in finding the best place for your savings? Our Smart Savings product is a great way to keep your money safe while federally insuring your funds up to $3 million, giving it room to grow.
Credit unions care about their members before anything else. They’re not held back by investors or profit. They exist to serve their community. With typically offering better rates of return than big banks, now is the time to start saving with a credit union.
Please note, membership is required to open a DCU Checking or Savings Account. Visit our membership eligibility page for more information.
This article is for informational purposes only. It is not intended to serve as legal, financial, investment or tax advice or indicate that a specific DCU product or service is right for you. For specific advice about your unique circumstances, you may wish to consult a financial professional.
*Smart Savings is a sweep account, which means that balances in excess of $250,000.00 and up to the Maximum Program Deposit Amount ($2,275,000.00) will be automatically swept to FDIC and/or NCUA-insured accounts held at participating Receiving Financial Institutions. Balances that exceed the Maximum Program Deposit Amount will remain in the Smart Savings account at DCU. The same Dividend (Interest) Rate and APY apply to the entire account balance (including funds that remain in the Smart Savings account). The Maximum Program Deposit Amount and Receiving Financial Institutions may be changed at any time. To review the list of the current Receiving Financial Institutions and the current Maximum Program Deposit Amount, visit https://www.dcu.org/bank/savings/smart-savings.html.