Is a bank CD safer than a Credit Union CD?

All the information I can find says NCUA is as safe as FDIC and no one has every lost money insured by NCUA or FDIC.

Has one one ever heard of a Credit Union not paying the full interest on a share certificate?
Wouldn't the NCUA insurance kick in if a Credit Union said " Sorry, we don't have enough cash to pay your full interest this month so here is say 1%,and you can have all your principal back "
Would FDIC kick in if a Bank reneged on a CD's interest but offered to return full principal?

My research says that's an impenetrable layer of minutia.

Might be best just to ask your CU.

Just off the top of my head I would think that they're bound by something to give you your interest if they're not seriously screwed. How often does it compound? If you're talking about insured amounts(eg $100k-$200k) I don't think you stand to lose much interest if they're dishing it out monthly. Is the stretch worth the concern? What sort of a percent are we talking about?

I'd ask your CU.

--Joe

It's not an issue of the Full Faith and Credit doctrine. I am told, perhaps incorrectly, that the obligation of the credit union to pay you dividends (which is what are paid on share certs) depends on the existence of earnings after required deposits to reserves. So, the government is only obligated to fulfil the CU's obligation up to a point. i will see if I can find the case I saw. I may have misunderstood it.

Oh gawd. Not another one.

Share deposits are not the same as CDs.

OP, in a takeover the FDIC/NCUA have the authority to reset above market CD interest rates to market pricing. In practice, sometimes they do and sometimes they don't.

You don't lose your principal. You don't receive scraps on your interest. You get the interest rate you were promised thru the effective date of the transfer. Then you have the option of staying with "New Bank" at the new promised interest rate or taking the money out of your CD, usually without penalty.

The reason they have this power is so they can reverse some of the screwy things failing institutions do deparately to increase deposits right before they fail.

As much as I think the CU system is in need of reform, this all is a non-issue for small account holders.

Good link. Here is the offical site's copy.

Seems like the NCUA denied the claim becuase the CU was insolvent and was still operating which means NCUA wasn't doing it's job.

One of the ways a federal credit union differs from a bank or savings institution is that it pays dividends, which are based on earnings, rather than interest, which is a contractual obligation, not based on earnings. A federal credit union cannot pay dividends unless it has earnings and the appropriate transfers of earnings to reserves are made.
The Liquidating Agent determined Unified Singers to be insolvent for at least a year prior to liquidation. Unified Singers had no earnings in 2002 from which to pay dividends.

Cheap said: Both NCUA and FDIC are backed by the full faith and credit of the United States government.

Deposits are insured (principal and interest) up to their maximum.

This isn't hard to find.

If your bank lies to you, then get the Comptroller of the Currency involved.

If you are going to be this paranoid, you really should do your own research...
FDIC statement
The Federal Deposit Insurance Corporation (FDIC) preserves and promotes public confidence in the U.S. financial system by insuring deposits in banks and thrift institutions for at least $100,000; by identifying, monitoring and addressing risks to the deposit insurance funds; and by limiting the effect on the economy and the financial system when a bank or thrift institution fails.

An independent agency of the federal government, the FDIC was created in 1933 in response to the thousands of bank failures that occurred in the 1920s and early 1930s. Since the start of FDIC insurance on January 1, 1934, no depositor has lost a single cent of insured funds as a result of a failure.

and also...
Savings, checking and other deposit accounts, when combined, are generally insured to $100,000 per depositor in each bank or thrift the FDIC insures. Deposits held in different categories of ownership – such as single or joint accounts – may be separately insured. Also, the FDIC generally provides separate coverage for retirement accounts, such as individual retirement accounts (IRAs) and Keoghs, insured up to $250,000. The FDIC's Electronic Deposit Insurance Estimator can help you determine if you have adequate deposit insurance for your accounts.

The FDIC insures deposits only. It does not insure securities, mutual funds or similar types of investments that banks and thrift institutions may offer. (Insured and Uninsured Investments distinguishes between what is and is not protected by FDIC insurance.)

Understand the quarterly financial statements.You can just look at their delinquencies too.

trader profit-

I e-mailed counsel yesterday. So far, they e-mailed me back requesting my phone number and mailing address. Apparently a simple 'yes' or 'no' to my question is not in the offing as of yet.

traderprofit said: Understand the quarterly financial statements.You can just look at their delinquencies too.

if an individual can glean from this that a credit union is in financial trouble, why can't so-called professionals like the feds step in sooner to clamp down on their losing money practices?

All this trouble over how many $$ extra interest? Is it REALLY worth it at this point? Interested in seeing how the FDIC protects credit unions. However, "thrifts" are not the same as credit unions.

unknownshopper said: OP, in a takeover the FDIC/NCUA have the authority to reset above market CD interest rates to market pricing. In practice, sometimes they do and sometimes they don't.

Market pricing at the time I openend the CD, or at the time the bank/CU defaults? And will the new rate be based on original maturity period or remaining period?

"Insider deals" is not the standard for whether you would get your CU DIVIDENDS (emphasis that they are NOT interest).
The law (or regulation) and it's interpretation are the standards.

traderprofit said: "Insider deals" is not the standard for whether you would get your CU DIVIDENDS (emphasis that they are NOT interest).
The law (or regulation) and it's interpretation are the standards.


So are there an other documented cases other than Unified Singers?
Do we all have to have a lawyer look at the fine print on our credit union certificates?
Has anyone heard back from the NCUA with an explanation of the Unified Singers case?

I see no basis for the monthly payment of dividends having anything to do with NCUA's liability. I'd like to know Sam's title.

Perhaps if dividends have been declared on the account, then they are covered under the law because they are then a legal obligation of the credit union. Certainly, if they have been credited to your account they are then insured.

It's looking like a CU Share certificate is more like a preferred stock with a guarantee on the principal price.
Dividends have to be declared to be an obligation of the CU.

I see no basis for the monthly payment of dividends having anything to do with NCUA's liability. I'd like to know Sam's title.

Perhaps if dividends have been declared on the account, then they are covered under the law because they are then a legal obligation of the credit union. Certainly, if they have been credited to your account they are then insured.

It's looking like a CU Share certificate is more like a preferred stock with a guarantee on the principal price.
Dividends have to be declared to be an obligation of the CU.

A lawyer from NCUA finally called me today. He said that for CU share certificates you are insured for the principal and dividends already paid on your account. The rate is not guaranteed if the CU does not have earnings for the payout. According to him, 99.99% of the time the quoted interest rate is paid over the life of the share certificate...must do your homework though as to the financial soundness of the CU you are joining.

As to bank CD's, if they fail, you are not guaranteed to get the quoted interest rate either.

Thanks for finding out the details, ferro!

So can we say, the difference would be that a bank could pay interest from additional debt and equity financing in a bad year, whereas a CU has to have earnings (in that year)? Anyway, it's probably largely a non-issue. I'm guessing if you spread your CDs over several CUs, the additional rate you can get over banks will more than make up for the additional risk.