About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Credit Union Terminology for CDs & Deposit Insurance

More savers may be leaving their banks this year as their CDs mature and they see how low the new CD rates are. As many readers of this blog know, the best rates are often at credit unions. This may cause more people to look into credit unions, and they may be confused by some of the terminology. One reader left a comment asking what the difference was between CDs and PenFed's money market certificates. Also, he was concerned if these would have the same insurance coverage as bank CDs.

I don't know why PenFed calls their CDs "money market certificates". In summary, they are essentially the same as bank CDs, so I usually call them CDs for short. The "certificate" part makes sense. It's common for credit unions to leave off "deposits" for the names of their accounts. The reason is that deposits are called shares at credit unions since they represent an ownership in the credit union. Consequently, a savings account is often called a share account and a certificate of deposit is often called a share certificate.

Several credit unions leave off the word share in their account names. For example, Alliant Credit Union uses the name "regular savings" for its main savings account. For CDs it uses the name "certificates".

One reason PenFed may include "money market" before certificate is to differentiate it with the IRA certificate. I can understand why this creates confusion since "money market" is usually in the name of savings accounts that provide limited check writing. Money market accounts have variable rates and no fixed term. However, PenFed's money market certificates are CDs with fixed rates and fixed maturities.

On the issue of deposit insurance (or share insurance for credit unions), the National Credit Union Association (NCUA) provides share insurance coverage for the vast majority of credit unions in the nation. This coverage is essentially identical to what the FDIC provides to banks. Here's how the NCUA defines what is covered (under "How Do I Know If My Credit Union Is Federally Insured?"):

NCUA share insurance covers all types of deposits received at a federally-insured credit union, including deposits in a share draft account, share savings account, or time deposit such as a share certificate. NCUA insurance covers depositors' accounts at each federally-insured credit union, dollar-for-dollar, including principal and any accrued interest through the date of the insured credit union’s closing, up to the insurance limit.

It should be noted that not all credit unions are federally insured by the NCUA. A few credit unions in some states only have private deposit insurance via the company American Share Insurance (ASI). Only state-chartered credit unions can drop federal insurance. All federal credit unions (with federal in their names) must be federally insured by the NCUA. I have more details on ASI in this blog post.

One problem with name "money market" is that it's not only used in "money market accounts" but also in "money market funds". A money market fund is short for money market mutual fund. This is not a deposit account at either a bank or a credit union. It's usually offered at brokerages. They are managed conservatively with investments in short-term, fixed income securities. However, there is typically no FDIC or NCUA insurance coverage for money market funds.

If you're looking for CDs with higher rates than what your banks are offering, don't be afraid of credit unions. Their share certificates are the same as bank CDs. Also, the certificates at federally-insured credit unions have essentially the same deposit insurance coverage as bank CDs.

Here are some references if you want to learn more about credit unions:

For more information on PenFed and its CDs (money market certificates), please refer to my latest PenFed CD review.

Edit 1/13/2012: Added more details about which credit unions may not have federal insurance.

  |     |   Comment #1
There is most certainly a "difference" with getting a certificate of deposit with a bank and one with a credit union from my most recent experience which is a nightmare!  The credit union I dealt with was one listed in Ken's group and I had no idea what I was opening myself up to.  Although in their own information they state "we will send/give you a receipt and a certificate note showing the amount of the certificate, the dividend rate, the term, and the maturity date.  Please retain these materials and the attached Certificate Disclosure and Agreement for your records", I was not given ANY of this!  I purchased the CD at a local "Share Partner" on 12/06/11 and was assured by the rep on the phone that I would get all the items I needed in the mail, I received nothing!  After days of waiting, I called only to be told to go print what I needed from the internet!

I decided for the amount of money I had invested in the CD, I deserved "something" from them with the info on it showing the Joint names I requested and other important info found on a normal CD.  All I got from them was statement copies from the internet which did not show my spouse as joint.  I kept calling and got excuse after excuse for why they did not get the "Certificate" or anything similar to it to me.    Today I spoke to a Supervisor and after waiting quite long on the phone, she returned to give me the reason they never got the Certificate to me.  She said their "machine broke" but now it was fixed and they mailed it out yesterday and I should get it in the mail before long.  What machine??  Any CD I have ever gotten is printed off of a computer???   So now I await the next thrill of entrusting my money to a "credit  union"!  These people act like they are running a snowball stand and do not take it very seriously that they are using OUR money and we have a right to have the proof we need!

I assure you I will find whatever BANK I can find even if I have to take a lower rate so that I can actually go inside and be with them while they draw up my "certificate" and be able to read it in front of them.  I hope other credit unions are run more professionally than the one I unfortunately am doing business with and treats their customers more professionally and honestly.  THEIR MACHINE  BROKE?? That takes the cake!    Now I am waiting again to see if they will send me the paper with the CD info on it that they themselves state we have a right to expect from them.  If not, I will find the CEO of that place and send him my packet of anquish from this certain CREDIT UNION!  I know Ken means well by trying to steer us to credit unions in these bad times but people be very careful of which one you select.   I did business with a credit union from a company my spouse used to work for and they were very professional and never acted as unprofessional as this one so I know I must have just gotten a "rotten apple" this time.  It frightens me that I have trusted a chunk of my savings to these uncaring, unprofessional people for a FIVE year  "whatever" hopefully CD!
  |     |   Comment #6
#1, What do you mean by...

I purchased the CD at a local "Share Partner" 

Not familiar with that term. 
  |     |   Comment #2
I have been using credit unions and banks for years,whoever has the higher rate. I have had little problems at both but nothing major and always have been worked out. The credit unions I belong to have an on line banking and I can see my account and my cds whenever I want and print them off. I belong to 10 credit unions and have cds at all of them if you want a higher rate you have to deal with them if not don't.
  |     |   Comment #3
Anony #2   I don't want to be unfair to all credit unions because of my particular experience.  However, since you seem to have good experiences with them could you please advise me if the credit unions you have dealt with give you anything like the paper certificates we get at banks?  Mine calls them "certificates" so I was led to believe I would get something close to what I am used to with banks.  If this is not the case in your experience, would you please advise?  Thanks!
  |     |   Comment #5
#3:  Some do some don't but I never worry because I have the statements they send me and the receipts where I gave them the money. When you cash out your cd you do it on line so it does not matter and it is not like it used to be, when you go in all you give them is your drivers license number and they give you your money you don't have to bring the CD in anymore.  Who is the credit union, I might know something, if you don't want to say I understand. I have opend and closed dozens of CDs with  credit unions and never a hitch. 
  |     |   Comment #8
#5  Thanks for the additional info about CDs.  I have a bank here which refuses to let one close a CD if they don't bring in the "Original" copy of their signed CD.  This is why I felt having a copy for proof was important.  Most of my other banks will accept just a copy.  I did not know the credit unions just do it over the internet etc.  Maybe this is why the one I am dealing with now does not think it is a big deal to give a customer a CD for their own records. 

#6:  I was referring to what I think is called a "Share Branch" not Partner.  I like the credit unions who have Shared Branches in my city because I can turn the check over to them and it is put into the savings account with the CU I am using and I don't lose the quoted CD rate incase my check gets to the CU after a rate is lowered.  I can also withdraw any dividend/interest checks monthly or quarterly from the Shared Branch in my same city.  This part about the CU I really like and have had no problem with.  This just seems to be a "learning" experience with me dealing with a CU after so many years of just using banks.  Once things are worked out, I'm sure it will all be ok. 
  |     |   Comment #9
#8:It's Me again:      Penfed does not have shared branches so I just send a check in or if I want something and worried about the time I just wire it. If you have a good rate you want wire it, the money it costs you to wire it will be less than you lose by letting the check sit in the mail.  I ladder cds and right now I am at a 6 year ladder. I had a cd come due 4 weeks ago at desert schools(5.85% by the way) and I went in with just a driver's license and they gave me the check. Jan 11th I had a cd come due at PenFed (6.25%) and I went on line and closed it and they are sending me a check, didn't talk to anyone, it's easy.
  |     |   Comment #10
#8:  Forgot this,You have to have a share account and when you want a CD you just send the money into your shared account and then when it is there you open the CD if the rate is not there anymore you don't have to open the CD. I have never had a CD rate get away from me. Remember a lot of credit unions hold them for the month and others seem to change their rates on wednesdays.
  |     |   Comment #4
As Ken has pointed out, you can get higher rates at credit unions. All of my dealings have been positive & the returns are much better & worth the time & trouble. You want problems? Deal with Bank of America in Cape Girardeau, Missouri.
  |     |   Comment #7
"Money Market certificate" had a very specific meaning in the late 70s & early 80s.  Credit Unions and banks generally have two different sets of laws/regulations (with some overlap, and much redundancy) with different but equivalent terms.  Certificate of Deposit can be interpreted as specific to banks.  So, many CUs avoid the term (some might use it due to being relaxed, or to be easier to relate to consumers used to banks).  Some banks avoid the term to reduce expectations for being issued an actual certificate, though some seem to be concerned about a CD being a negotiable bearer document and thus don't issue a certificate to avoid fraudulent redemptions (or inconveniencing customers by requiring they present the actual certificate when closing the CD).


"The move toward market-determined-rate deposits at the thrift insti-
tutions began in 1978 with the authorization of the six-month Money Market
certificate, with a rate ceiling tied to six-month Treasury bill rates and a
minimum denomination of $10,000."



(j) "Certificate of deposit" means an instrument containing an acknowledgment
by a bank that a sum of money has been received by the bank and a promise
by the bank to repay the sum of money. A certificate of deposit is a note of the bank.
  |     |   Comment #11
Thanks guys/gals or whoevers for the input on the credit unions and the way they work.  They are different from banks and I have to understand that and get used to the differences especially if I can get a bit more interest.  I really do like those with shared branches.  They make it work ever so smoothly like a poster mentioned.  I am ok with them after reading your informative posts.  Thanks for the help!
  |     |   Comment #12
Ok People, since I was negative on my credit union, I feel I now have to give credit where credit is due.  The lady kept her word.  Today I got a mailing from them with information on their letterhead giving me the information I requested which I felt a CD should have.  In fact it contained all the info they showed I would get if I opened up an account with them.  I am at peace now with the credit union and just sorry it took so many weeks and hours on the phone to get them to understand what I needed.  BTW, the one I am dealing with is DCU and I hope to do more business with them in the future now that I know they understand what I need for my records and if they keep their CD rates at what I can use for my financial needs.  This was a learning experience for me.

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