Q: Are there any benefits to NCUA-insured credit unions over the FDIC-insured banks? Are the risks about the same, such as exposure to real-estate loans and examiner oversight?A: The benefits ultimately are identical, though there is some argument whether one fund is stronger than the other. The National Credit Union Association and the Federal Deposit Insurance Corp. each guarantee that accounts of clients at participating institutions are covered should the institution fail.
A:Until the financial meltdown, deposits were insured at each institution up to $100,000 per individual. Since the bailout, the coverage has increased — at least until Dec. 31, 2009 — to $250,000 for each depositor.
Some say the NCUA is stronger because it has not been tapped into in about 40 years, and the FDIC has been dipped into six times this year alone. A strong argument, but the FDIC is still solvent, so little worry there.
More important is the level of risk each carries in its investments. Credit unions, of course, carry the history of investing mostly with their membership via mortgages and other personal loans. Unless the institution dabbled in the subprime market, it’s not apt to have been pinched too badly.
What you need to look at is an institution’s balance sheet, which is typically available on request for current clients. Credit unions often provide it each month with your statement.
If the portfolio is too heavy in subprimes or any one risky area, it might be time to move, especially if your deposits exceed the insured level. If they’re open to risk, so are you.
– John Harb, Golden
