How Deposit Insurance Protects Savers

For several months, CDs from Melrose Credit Union have appeared at or near the number-one spot on our table of top-yielding certificates of deposit. Recently, the National Credit Union Administration, an independent federal agency that oversees credit unions, announced that it had taken Melrose into conservatorship because of “unsafe and unsound practices.”

That may set off alarm bells if you are a yield-starved saver who invested your money in Melrose CDs, but be assured that your money is safe. Money held in deposit accounts at Melrose is federally insured up to the limits prescribed by the National Credit Union Share Insurance Fund, which is the credit union equivalent of Federal Deposit Insurance Corp. coverage for bank accounts. An individual’s deposits at a credit union are insured for up to a combined $250,000 in all deposit accounts—including CDs as well as checking and savings accounts. Joint accounts come with separate coverage of $250,000 for each depositor listed on the accounts. IRAs and trusts come with their own insurance limits, too. At www.mycreditunion.gov/estimator, you can use a tool to calculate whether your deposits are fully insured.

Until Melrose’s financial troubles are resolved, we are removing its CDs from our tables. New York–based Melrose has suffered heavy losses related to loans for taxi medallions, which taxi operators purchase to license their services. (The taxi industry is under pressure from ride-sharing services such as Uber and Lyft.) If a troubled credit union can’t resolve its issues, then it will liquidate, and the NCUA will either transfer accounts to a credit union that has agreed to acquire them or send checks to customers for their insured deposits. (See also 7 Great Credit Unions Anyone Can Join).