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Is Your Credit Union Safe?

Written by Nickel - 13 Comments

With all of the recent headlines about struggling banks, I thought it would be worth talking a bit about credit unions. According to a recent article in the WSJ, five of the nation’s largest credit unions are reporting paper losses on mortgage-related securities.

As it turns out, all five of these institutions are “corporate” credit unions that hold assets for regular credit unions. According to Kent Buckham of the National Credit Union Administration (NCUA), which insures participating credit unions in much the same way that the FDIC insures banks, these losses are likely overblown by market panic, and he doesn’t expect the affected credit unions to have to realize them.

At risk of failure?

Apparently the last time a corporate credit union failed was in 1995, and the regular credit unions that were affected by this failure were ultimately able to recover all of their funds. This isn’t to say that credit unions are bulletproof, however, as nine regular credit unions have failed this year. That being said, some of these were very small credit unions, one of which (Port Trust FCU) had only $461,000 in assets.

Here’s a quick look at four of the largest regular credit unions in the United States. The star ratings refer to Bankrate’s most recent Safe & Sound ratings for each institution:

  • Navy Federal Credit Union – 3 stars
  • Pentagon Federal Credit Union – 4 stars
  • Alliant Credit Union – 3 stars
  • The Golden 1 Credit Union – 4 stars

(5 stars = best, 1 star = worst; most institutions fall in the 3-4 star range)

For the sake of comparison, check out my list of the safest online banks.

As alluded to above, the vast majority of credit unions are insured by the NCUA, which provides coverage similar to that provided by the FDIC for deposits in regular banks. Just be sure to stay under the limits at an insured institution and you should be okay. In fact, we have some CDs at Pentagon Federal Credit Union, and I’m not losing any sleep. PenFed seems healthy enough, and they’re also NCUA insured.

Published on August 15th, 2008
Modified on August 19th, 2008 - 13 Comments
Filed under: Banking

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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13 Responses to “Is Your Credit Union Safe?”

  1. 1
    Llama Money Says:

    I had no idea that PenFed was so large. I have both of my car loans through them, and love their rates / service. I also use their rewards credit card… great CU to be sure.

    As for worrying about them failing, not a bit. From what I understand, their lending standards are extremely high. If you aren’t “bullets” , they aren’t lending you a dime. So they will cruise right on by the subrime mess and not miss a beat.

    If only they had more branches around like my bank…. I could drop BoA and have only one major financial institution.

  2. 2
    Wil Says:

    Credit Unions are great things indeed! I’ve worked for banks and for credit unions, and there is absolutely no reason for an individual to belong to at least one credit union. Aside from safety and security, many times credit unions are on the forefront of technology as well!

    They aren’t perfect, and I don’t want to come off as a nut-job CU fanatic, but for individuals, they are really, really good.

  3. 3
    Anni Says:

    I have a rewards checking account at a local credit union, the interest rate is far above what my bank was offering. They are insured by NCUA, so making the switch was worthwhile.

  4. 4
    Bear Says:

    I have to agree with what has been said. I used to work for a bank that charged very high fees on many things. When I got sick of my old bank, I shopped around and found Credit Unions to be a much better deal, for the most part. Where I live, the banks seem to offer better better deals on 2nd mortgages (rates and fees) and similar rates on savings accounts (the banks do sneak in fees for savings accounts!), but everything else the CUs have the banks beat hands down.

    I hear so many people complain that they were hit hard on overdraft fees, OD protection fees, loan application fees, ATM fees, yet they never shop around for a better deal. I put up with a lot of such people when I worked at a bank. Credit Unions seem to offer much needed competition, if only more people would look at them.

  5. 5
    Heidi Clayton Says:

    How safe is the Langley Federal Credit Union and the Bayport Credit Union in my Hampton Roads Virginia area??
    Thank’s for any info which you could provide.
    Clayton

  6. 6
    Mary Guzman Says:

    Hi!

    Would you please tell me where I can find out if the following credit unions are safe and stable?

    St. Joseph Credit Union in San Antonio, Texas
    First Mark Credit Union in San Antonio, Texas
    Nevada Federal Credit Union, Las Vegas, Nevada

    Thank you!

  7. 7
    WIL LOCKIE Says:

    I belong to Safe Credit Union in Sacramneto valley CA. They have about 20 branches locally. A couple of questions bank rate gave them 4 stores this was before the economic crisis of recent. How are they doing now? Are they a state charted credit union or federal charted credit union? I hear that matters when it comes to being monetary guaranteed. Also, if i wanted to follow the ebb and flow of thier stock..what is thier abbreviation and where can I observe it? Thankyou

  8. 8
    Mon.Y. Says:

    I would also like to know if my CU is safe. San Antonio Credit Union.

  9. 9
    Sandra North Says:

    I am seeking the current rating of the Western Healthcare Federal Credit Union in Concord, CA.
    Can you tell me how safe it is? Thank you

  10. 10
    thrivalista Says:

    For all those of you who want to know how safe your credit union is, you can search for it by name at bankrate.com.

    We found out ours is only rated 2 stars, and are switching to a 4-star (highest rating available w/in a 15 minute drive) when doors open after the holiday on Tuesday.

    Re NCUA insurance – that’s only a guarantee for as long as the US doesn’t sink into it’s own sovereign debt crisis, or – even sooner – if folks panic and there’s a run on the banks/credit unions. Think about creative ways to invest directly in your local economy (farmers, hardware and grocery stores, companies that make useful reliable tools, holistic health care practitioners, etc.), and avoid risking your savings boiling away in our current economic quagmire.

    It’s clear we can’t count on the government, whether during natural or economic disasters.

  11. 11
    Jessica Says:

    Everyone says credit unions are better than the ‘big banks’, but I just found out my credit union – Chesterfield Federal, in Chesterfield County, VA – has been taking $2 a month from my savings account. A savings account!
    It was bad enough they didn’t give interest, now they took all my money I thought was stored away in savings. Check your credit union rules, and check frequently!

  12. 12
    Stuart Says:

    I would like to know if Missoula federal credit union is solvent. For sizable cd deposits. Thats Missoula Mt. Thanks

  13. 13
    linda roumanos Says:

    would like to know if suma federal credit union is safe. they have two offices in ct and two in ny.they are insured by the ncua. checked the bbb ,had only one complaint. no other complaints i could find on line. any info would help. thanks so much. linda

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