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When is a CD Rate Too Good to Be True? Verifying FDIC or NCUA Membership

If you see a website advertising a very high rate on a certificate of deposit or something else that looks like a bank account, you should first determine if the website is from a FDIC or NCUA insured institution. Both FDIC and NCUA are agencies of the US federal government. FDIC covers banks and NCUA covers credit unions.

Not only do FDIC and NCUA provide protection for depositors against bank/credit union failures, but also ensure a level of standards. Being a member of FDIC or NCUA ensures that the institution meets a long list of regulations (see FDIC regulations and NCUA regulations). Many of these regulations are designed to protect customers. Foreign banks may be legitimate, but it's hard to know what standards they are required to follow.

For most of my posts, I include a link to the FDIC or NCUA page which shows the government information about the institution. One important piece of information is the URL of the institution. This can help verify that the website really belongs to the institution. Just click on my FDIC or NCUA link on the bottom of the posts.

If you're trying to determine if a bank is FDIC insured, go to the FDIC's Bank Find Page.

For credit unions, go to the NCUA's Find a Credit Union Page.

A few credit unions are not insured by the NCUA. All of these that I'm aware of have private insurance by ASI. These are legitimate credit unions. You can verify that a credit union is ASI insured from the ASI's Credit Union Search Page.

[Edit 1/31/08: Updated ASI info. Patelco Credit Union is no longer privately insured by the ASI. It's now federally insured by the NCUA.]
[Edit 2/08/09: Updated URL to ASI search page.]
[Edit 5/28/09: Updated URLs to NCUA pages.]
[Edit 12/1/11: Updated NCUA URLs]

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  |     |   Comment #1
Very good information. I checked on GMAC bank and FDIC site shows GMC bank in PA is inactive. Should we concern??
  |     |   Comment #2
You should be concerned only if you failed to read the notice mailed to your house that informed you that the PA bank would be merging with the UT bank.
  |     |   Comment #3
I didn't get that notice? What did it say?
  |     |   Comment #4
It said that the PA bank is merging with the UT bank and the UT bank is the surviving bank. No action on your part is required. All your checks are still valid and your account number stays the same. If you already had an account at the UT bank, check to make sure the merger doesn't put you over the FDIC insurance limit at one bank. Call customer service if you have any questions.
  |     |   Comment #5
Excellent essay.

However, that private insurance outfit makes me very nervous. The NCUA is backed by the full faith and credit of the US government, as is the FDIC.

It is apparently cheaper for a CU to use private insurance instead of NCUA insurance. One hopes that the auditing is not looser.
Banking Guy
  |     |   Comment #6
As one of the commenters mentioned, late last year GMAC Bank transfered all of its consumer deposit accounts to GMAC Automotive Bank, an affiliate Industrial Bank chartered under Utah law (Utah Bank). Here's the new FDIC page. I have more on this in my previous post.

Regarding ASI insurance, I also think NCUA is preferrable. Many credit unions have both NCUA and ASI insurance. ASI is used to cover deposits over the NCUA limits.

Last year I received a comment that seemed to be from a Patelco official. It does provide a little background on this issue. Below is the comment:

Federal Insurance provides coverage of up to $100,000 per member/customer. ASI's primary share insurance allows coverage of $250,000 per account. Big difference. Patelco had ASI's excess coverage prior to conversion and still had over $450 million in uninsured deposits even at that level. With private primary insurance we were able to insurance most of that $450 million at a cost per $100 deposited that was less than the federal alternative. Today over 97% of our $3.3 billion in deposits are insured. We also have net-worth of over $400 million or 11% of assets. A very strong financial institution.
  |     |   Comment #7

Suggest you include CDARS in your work.
Approved as legal by FDIC, it allows a member bank to combine up to $100k in one account with literally hundreds of other, (non-affiliated ownership) banks so that millioins can be insured in one account.
Jigish Parikh
  |     |   Comment #8
Thank you very much sir...U are maintaining a great blog..
jigish parikh.
  |     |   Comment #9
Check out your credit union financial data and ratio analysis posted on NCUA.gov here:


You'll need to look up and then enter your credit union's charter number.

The FPR reports are succinct and easy to read. Look for deteriorating Ratio Analysis report trends over several quarters and performance against peers.

The last eight credit unions to go into NCUA conservatorship, along with date and charter number are:

Date Charter# CU Name
07-2007 65118 Norlarco, CO
06-2007 21721 Peoples First Choice, NJ
04-2007 20173 Obelisk, IN
02-2007 62465 Huron River, MI
02-2007 68189 Communities United, KS
03-2006 67978 Credit Union Group, KS
02-2006 02260 Union Pacific, NE
01-2006 61570 Gulfport, MS

If you look at the quarterly ratio analysis in the FPR report filed in the quarter preceding conservatorship for each of these credit unions, you get an idea of what a troubled credit union's financial trends look like.

Trouble signs that seem to stick out are:
- Net Worth / Assets <>
- Delinquent Loans / Net Worth > 4%
- Net Charge-Offs / Average Loans > .5%
- Net Income < 5% of revenue. 5%="" of="">
  |     |   Comment #10
Evidently Patelco still reports their quarterly financial data to the NCUA. However, the only way to access this data is by entering their Charter Number 97082 at this URL:


Here's the link with their Charter Number already entered:


If you try to search for Patelco on this page, you won't find them:


Reviewing the latest Ratio Analysis, it looks like they are having more delinquent loans and charge-offs than their peers. Something to consider before investing a lot in their CDs.
  |     |   Comment #11
Is there any method of verifying legitimacy of foreign banks? I've come across one called Millennium Bank, a subsidiary of United Trust of Switzerland. They're advertising 5 month CD's with 5k minimum deposit with 6.5% yeild.
Banking Guy
  |     |   Comment #12
I'm not aware of any good method. I've looked into Millennium bank about 2 years ago and many readers have added their 2 cents. Please refer to this post.
  |     |   Comment #13
I have some high yield callable CDs in my IRA account, as some of them are issued by Lehman Brother, I am kind of worried, even they are FDIC insured, I just don't know what will happen in the future?
  |     |   Comment #14
The FDIC website list GMAC FDIC #as 57803 with an address in UT and two PO boxes in PA. It appears that the UT address may be a physical bank and the main address identified by the FDIC. When talking to the GMAC customer service rep they seem confused about the FDIC listing and was not sure if there was an actual physical address but did state that somehow UT was involved. Can anyone assist with this so I can determine if the GMAC bank is legit as we would like to open a CD there? It seems like the service rep would know more about how things work.
Personal loan
  |     |   Comment #16
It is important for depositors to know first whether the bank or lending institution is registered and licensed by the FDIC and NCUA before placing or borrowing money. Because whatever happens, if the bank files for a bankruptcy depositors are protected by the FDIC bureau. And when they face trouble with their creditor, they can question the said creditor with the help of NCUA.
  |     |   Comment #18
As a former banker from a failed institution (Bank), when asked by customers about the Bank's safety, I always said it was hard to earn the money, so only invest in insured (FDIC/NCUA) institutions.  You don't need to take chances, so always invest under the insurance limit (including room for accrued interest).  There are so many other ways to loose money, but don't take any chances with your savings in Banks/CU's.

OC Steve

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