3 Tips To Protect Credit Union Deposits

By Constance Gustke • Bankrate.com

  • In the crisis of 2009, 28 credit unions failed compared to 140 banks.
  • Credit unions failures can be traced to bad loans and bad financial moves.
  • Money has poured into credit union coffers as depositors leave banks.

Think your credit union can’t fail? Think again.

Though seen as the sleepy backwater of banking, credit unions do sometimes fail. Like banks, they may hand out bad loans, suffer mismanagement or make speculative investments.

In the financial crisis of 2009, 28 credit unions failed compared to 140 banks, and that was when the credit union industry was staring down the barrel of a “significant crisis,” says Debbie Matz, chairwoman of the National Credit Union Administration, which regulates credit unions.

On average, 10 to 20 credit unions fail every year, Matz says. Bankrate will give you some tips on holding your money in a credit union account, with an eye toward protecting it if the institution fails.

Not just small credit unions fail

So far this year, 12 credit unions have failed in nine states. Many are in small towns, such as the United Catholic Credit Union in Temperance, Mich., or Saguache County Credit Union in Moffat, Colo.

But some big ones fail, too. Take Telesis Community Credit Union in Chatsworth, Calif. This spring, the NCUA shuttered the $301 million credit union after several commercial real estate loans soured. Regulators later sold Telesis to a bigger, healthier player, Premier America Credit Union.

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