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How credit Unions Guarantee member savings





How Credit Unions Guarantee Member Savings
More and more, people are turning to financial institutions to alleviate the effects of the current financial crisis in their lives. One such institution is the credit union. A credit union is a financial institution formed through a cooperative, with the members functioning both as owners and controllers. Credit unions are formed with the objectives of providing financial services such as better savings, lower-interest loans and other similar benefits, to members. The board members of the credit unions are elected via single votes, no matter how much each member has invested.

Assets and earnings of credit unions vary world-wide from the relatively small funds of a local community credit union managed by volunteers, to institutions with billions of dollars and members numbering hundreds of thousands. Earnings are distributed as dividends to members. This dividend together with the benefits of reduced credit rates, higher interest rates on savings and other financial services make credit union memberships viable options to ever rising banking fees. How then do credit unions guarantee member savings? It turns out that there are several safeguards in place that secure each members investments.

One such safeguard is provided by the government. Although credit unions are not insured by the Federal Insurance Deposit Corporation (FDIC), the insurance institute that safeguards regular bank accounts, credit unions do offer insurance for member accounts. The National Credit Union Association (NCUA) supervises and regulates the credit unions while the insurance is provided either by the National Credit Union Share Insurance Fund (NCUISF) or by private insurance firms like the American Share Insurance (ASI).

Since 1974, American Share Insurance has been providing insurance of the savings of credit union members. It provides insurance of up to $250,000 per account of the member regardless of how many accounts the member has. ASI services only credit unions, being owned by credit unions themselves and not by investors out for profit. It provides both primary and excess of share insurance to the credit union members.

Primary share insurance is provided by the government since the 1970s, when then President Richard M. Nixon signed the law creating the NUCA and, soon after, the NCUISF. With the passage of The Helping Families Save Their Homes Act of 2009, the insurance protection of credit union deposit accounts was raised to $250,000. Specifically, the NUCA offers protection for credit union services like share savings accounts, checking accounts, Certificates of Deposit accounts and money market accounts. For primary share savings accounts where amounts exceed $250,000, private insurance firms can offer excess share insurance or ESI for an additional of up to $250,000. Only non-deposit investments are not normally covered by this, examples of which are common shares, mutual funds, etc.

Credit union insurance covers a lot more that what banks provide for its members with the help of both government regulations and private insurers. With these controls in place instead of the FDIC for banks, members get even more protection as well as benefits than bank depositors do. This makes it a lot easier for members of credit unions to make use of the various financial services of credit unions.
About Author Kim Valerio :

For more info you can visit <a href="http://www.memberspreferred.org" target="_blank">Eastern Idaho Credit Union</a>.


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Article Added on Wednesday, March 3, 2010
LD
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