Whew! Share Insurance extended to 2013

Okay, maybe you aren't as excited about the news that increased deposit insurance at both banks and credit unions will continue at least through December 31, 2013. But this is great news!

Back in October 2008 Deposit Insurance was raised for both the FDIC and NCUA temporarily and set to expire December 31, 2009. The extension is part of The Helping Families Save Their Homes Act of 2009, signed into law May 20, 2009. The action continues the increase from $100,000 to $250,000 on member share accounts. This isn't just good news it is big news since the $100,000 amount was set way back in the 1970's.

In my September post entitled Is your money safe? PART 2 I run through the NCUA's insurance estimator to give an example of how your actual insured deposit amount could be even higher than the $250,000. You can run your own estimates by using the NCUA share insurance estimator located on the website. If you haven't looked at this estimator, you should. Doing so could help you sleep a bit better.

How the bailout affects you right now

Everyone is anxious to see how the big bailout is going to affect the economy. Meanwhile the stockmarket isn't behaving as we hoped. But most of the aspects of the bailout haven't been put into place just yet--except one. We heard this was going to happen, but the speed at which it was implemented was surprisingly quick for government work. I'm referring to the increased deposit insurance.

Statutory Share Insurance Change: $250,000
The new law became effective on October 3, 2008, and will remain in place through December 31, 2009. The law provides for an increase in the minimum NCUSIF coverage from $100,000 to $250,000 on member share accounts. This includes all account types, such as regular share, share draft, money market, and certificates of deposit. Individual Retirement Account and Keogh account coverage remains at up to $250,000 separate from other types of accounts owned.

It's about time.

Is your money safe? PART 2

Awhile back I explained that your credit union deposits are insured by the NCUA, just as any bank deposits are insured by the FDIC. Now with more banks failing some people are starting to wonder if the FDIC can really cover their deposits. And you can't help but wonder if the situtation will spread to credit unions.

As for the FDIC, they continue to assure consumers that their funds are safe. They're updated website devotes a section to deposit insurance. Likewise NCUA has also added more about deposit insurance or as it's known in credit union speak "share insurance". The new share insurance estimator tool on the NCUA site is designed to give you a clearer picture of what funds are insured and up to what amount.

I used the calculator and put in some fictional numbers that included joint accounts, an IRA and a Trust. I set the combined balances higher than the $100,000 insurance and happily saw that my scenario was completely insured.
I encourage you to visit the NCUSIF estimator and plug in your own accounts, even just for your own peace of mind. At the end of the tool you can print results if you like.

Is Your Money Safe?

As the Feds shut down IndyMac customers lined up to withdrawal their money. Yes friends it's an old fashioned run on the bank. But since the creation of the FDIC in 1933 we have seen such a sight.

When banks fail the FDIC steps in to run the business as usual in an attempt to keep the FI stable while Feds seek a buyer for the FI. Still it's not unusual that customers get nervous over instability and pull out their funds. That's how it works for banks, but what about Credit Unions?

The FDIC only covers FI's that qualify as "banks and thrift institutions". In 1934, President Roosevelt signed the Federal Credit Union Act into law authorizing the formation of federally chartered credit unions in all states. The purpose of the federal law was to make credit available and promote thrift through a national system of nonprofit, cooperative credit unions.

The distinction is that Credit Unions are nonprofit, cooperatives and were self-regulated. It wasn't until the 1970's that the same level of federal protection given to bank customers was extended to credit union members with the creation of the NCUA.

Both the FDIC and NCUA collect money from the FIs they regulate for their insurance funds. Like the FDIC, NCUA guarantees that deposits are insured up to $100,000 and retirement accounts up to $250,000.

So is your money safe? Yes, Yes, and probably.
First , yes, your credit union is likely to be safer than the big mortgage player IndyMac. Its just credit union nature to not be involved with the risky mortgage practices that brought down IndyMac. But that's not a guarantee and anything could happen.

Yes, your money is guaranteed as stated above. If your credit union should fail the NCUA will make your money available.

But if you've got over $100,000 deposited at a single institution you probably want to review your security strategy.

Here's what the NCUA says:
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.

When the NCUA was created it was modeled off the FDIC. When the FDIC was created $100,000 was a whole lot of money. These days its not really that much. So it's not impossible for your aggregated accounts to reach that amount. It could be time to review your account strategy.

Really reviewing your deposit strategy (or creating one) doesn't depend on whether your money is at a credit union or bank. Both the FDIC and NCUA are operated by the government and have similar responsibilities.

The good news? A CNN poll asked online readers if they felt that there money was safe--66% responded a strong yes. Public opinion is a powerful force.