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Dear Dr. Don,
I want to know about the financial health of my banks. I have some accounts in Colonial Bank: a CD, a money market and
a checking account. I also have a small savings (account) and checking (account) in Grow Financial Federal Credit Union in Florida.
I read in the St. Petersburg Times that money markets are not FDIC-insured. Is my money safer in a bank
or a credit union? Please let me know ASAP.
-- Evelyn Earnings
Dear Evelyn,
The best way to check on the financial health of a bank, thrift or credit union is to use Bankrate's Safe & Sound ratings feature.
You can look up the financial institution's Safe & Sound CAEL rating and review its most recent financial
statements or a memorandum on its finances. The CAEL rating system gets its name by employing a series of 22 tests to measure
the Capital adequacy, Asset quality, profitability (Earnings) and Liquidity of each rated financial
institution.
The rating system is described below:
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Safe & Sound rating system |
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Grow Financial, for example, has a Safe & Sound CAEL rating of 3, or "performing." That equates to a
three-star rating out of a possible five stars. If your shares are fully insured, you shouldn't be concerned about
Grow Financial's 3 rating.
Also, there's a difference between money market accounts, or MMAs, and money market mutual funds, or MMMFs.
MMAs are bank deposits and insured up to the applicable FDIC insurance limits. MMMFs are typically safe short-term investments, but they are not insured.
Bank deposits insured by the Federal Deposit Insurance Corp. and credit union shares insured by National
Credit Union Share Insurance Fund are both backed by the full faith and credit of the U.S. government. There's no reason
to pull insured shares from a credit union and deposit them in an FDIC-insured account with a bank.
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