Your Money_ The Missing Manual - J. D. Roth [66]
Tip
Your money is safe in a credit union. It's insured by the NCUA in much the same way the FDIC insures bank deposits (see the box on Online banks).
Credit unions typically have strong ties to the communities they serve. They also tend to cooperate with each other instead of compete. In fact, many provide "shared branching," which means that if you bank at a credit union in Delaware, you may be able to make deposits, withdrawals, and loan payments at an unrelated credit union in Montana. It's as if they're all members of one gigantic banking network. (For more on shared branching, check out www.cuservicecenter.com.)
If there's a credit union in your area that you qualify to join, it's definitely worth considering. Just be sure to check out the types of accounts (Finding Accounts That Meet Your Needs) and interest rates it offers.
Frequently Asked Question: How Safe Is My Money?
You've probably heard the phrase "member FDIC" before, but what does that actually mean?
During the Great Depression, the U.S. government created the Federal Deposit Insurance Corporation in response to all the bank failures that were happening. The FDIC's job is to watch banks to make sure they're treating customers well, and to insure customer deposits so that even if your bank goes belly up, your money is safe.
The FDIC insures up to $250,000 per depositor per bank, but you can have more than this insured at a single bank if you have accounts that fall into different categories of legal ownership. For example, you can have an individual account insured for $250,000 and a joint account (with your spouse, say) insured for that amount, too. For more info, talk to your bank or check out the FDIC's website, www.fdic.gov, which includes a deposit insurance estimator.
Bear in mind that FDIC insurance covers only checking, savings, money market, and CD accounts (all of which you'll learn about later in this chapter). And note that the insurance limit is scheduled to drop to $100,000 per depositor on January 1, 2014.
As long as you keep your money in an FDIC-insured bank, you should be fine. If you're worried about your bank's health, do a little research using tools like the BauerFinancial star ratings (http://tinyurl.com/BCstar) or BankRate's Safe & Sound ratings (http://tinyurl.com/BRsafe).
Online banks
Online banks offer the same sorts of products and services as traditional banks. The big difference is that online banks don't have storefronts, so you can't walk in and talk to a teller. That means you have to make all your transactions online, by phone, or via snail mail. But for many people, these drawbacks aren't drawbacks at all—they're advantages.
In its July 2009 issue, the Consumer Reports Money Adviser stated, "Online banking, despite a rocky start, is becoming the rule rather than the exception." The newsletter cites research by Forrester Associates that predicts that 76% of American households with Internet access will bank online by 2011.
If you're considering an online bank, keep two things in mind: First, though many traditional banks (like Bank of America and Wells Fargo) have a growing online presence, they generally offer lower interest rates and have higher fees than online-only banks like ING Direct and HSBC Direct. And second, the biggest thing that holds people back from banking online is security concerns. But Consumer Reports Money Adviser claims that online banking may actually be safer than traditional banking because there's less of a paper trail and your transactions are digitally encrypted.
Here are some online banks to consider:
Ally Bank: www.ally.com