Certificates of deposit (also known as CDs) are one of the safest investments on the market, in large part because they are insured by government agencies. In commercial banks, your CD is insured by the FDIC. If you purchase your CD from a credit union, your investment is insured by the National Credit Union Association or NCUA.
In 1970, the NCUA established the National Credit Union Share Insurance Fund (NCUSIF) to insure member share accounts at federal credit unions. Similarly to the protection offered by the Federal Deposit Insurance Corporation (FDIC), the NCUSIF insures deposits at federal credit unions. Members of the NCUSIF must display the official NCUA insurance sign in their offices. All federal credit unions are required to be insured by the NCUA, and no credit union is allowed to terminate its federal insurance without notifying its members first.
The NCUSIF insurance fund is maintained by its member associations. If you are a member of an insured credit union, you do not pay for your share of the insurance protection directly. Instead, your credit union pays an insurance installment by making a deposit into the NCUSIF, based on the total of the insured shares and deposits existing at that member credit union. Generally, the insurance assessment is equal to one percent of the insured shares and deposits.
It is worth mentioning that historically, no member has ever experienced a loss of insured savings at a federally insured credit union. Liquidations or failures are usually a last resort, as there are many programs in place to assist federally insured credit unions before they reach a crisis point. In the even that an insured credit union does fail, the NCUSIF generally make any insured payouts within three days of the closure of the savings or credit union.
Like the FDIC, the NCUA insures CD deposits up to $100,00, which is the Standard Maximum Share Insurance Amount (SMSIA). Credit unions often offer the best CD rates since they are member-owned. If you are eligible for credit union membership, you might consider looking into purchasing a certificate of deposit from your federal credit union for the best certificate of deposit rates.