Truth in Savings

On September 9, 1993, the NCUA approved the final version of Truth in Savings, a regulation to which all Credit Unions must begin to comply, starting January 1, 1995. The primary intention of the regulation is to make it easier for members to comparison shop for deposit accounts, based on information about rates, terms and other features.

The regulation covers all consumer accounts at a Credit Union such as shares, share drafts, share certificates and other interest bearing accounts. Rollback accounts are no longer allowed. To ensure that Credit Unions pay dividends on the full balance in an account for each day of the period, NCUA requires using either a daily balance or an average daily balance method to calculate dividends. Our Credit Union will be using an average daily balance method. This method applies a periodic rate to the average daily balance in the account for the period (quarter). The average daily balance is calculated by adding the balance in the account for each day of the period, and dividing that figure by the number of days in the period.

Disclosure Requirements

Average Percentage Yield (APY) and Average Percentage Yield Earned (APYE) are critical pieces of information Credit Unions must disclose to members regarding shares, share drafts and share certificates. APY shows the total amount of dividends projected for an account, based on dividend rate and frequency of compounding. APY assumes funds REMAIN on deposit for the period. APYE shows a member the dollar amount of dividends actually earned as a percent of the average daily balance in his or her account. It is affected by members account activity, such as deposits and withdrawals, and by the method the Credit Union uses to calculate dividends.

To earn the APY dividend, your account must remain above $25.01 for the dividend period. You will not earn any dividends for the days that your average daily balance is below $25.01.

How Dividends are Calculated

Dividends are calculated using the average daily balance. This method applies a periodic rate to the average daily balance in the account for the period (quarter). The average daily balance is calculated by adding the balance in the account for each day of the period, and dividing that figure by the number of days in the period.