Bank Deal: Earn 1.00% APY on an FDIC-insured savings account at Barclays Bank.
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.
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