Products | Savings and Investment | Education Growth Fund Certificate | Frequently Asked Questions

Frequently asked questions about the Education Growth Fund Certificate

The Education Growth Fund Certificate is designed to help you save for the college education of your children or grandchildren. It is a special, long-term certificate that earns a higher (though variable) rate of interest than our regular share accounts and other certificates.

Account Structure | Rates, Fees and Penalties | Taxes & Other Concerns

ACCOUNT STRUCTURE

Q: Who can have an Education Growth Fund Certificate?

A: Any member (or potential member) under the age of 18 can have an Education Growth Fund Certificate.

Q: What is the minimum deposit to open the account?

A: $250

Q: How do I set up an account?

A: An Education Growth Fund Certificate is opened in the name of the child who will benefit from the funds. Therefore, the child must be the primary owner of an account at the credit union. If they do not have an account already, they must be eligible for membership and have a valid Social Security number. The parent(s) or grandparent(s) funding the account will be the joint owner(s) of the account (for more information on joint owners, see the next question).

Once the child has his or her own account, an Education Growth Fund Certificate can be opened. Activity on the Education Growth Fund Certificate will appear on the child's regular monthly or quarterly statement of account.

Q: These funds are for the benefit of a minor. I want to be sure that the funds I deposit are used for the designated purpose. Who has control of the account?

A: You have two options when it comes to account ownership. The first option is a joint account. In the case of a joint account, the funds in the entire account are assumed to be owned equally by both the primary and joint account owners, including any minors. Any account owner could withdraw funds or close the account at any time. This option would not, obviously, give you complete control of the account.

The second option is an Ohio Transfer to Minors Act account. Funds deposited in such accounts are an irrevocable gift to the minor. The minor is the sole owner of the funds. However, the minor does not have the authority to conduct transactions on the account until he/she reaches age 21.

Q: I will want to make additional deposits to these funds. Can I do this even though it is a certificate?

A: Yes, you can make additional deposits to an Education Growth Fund Certificate at any time. There is no minimum deposit amount, once you've made the $250 initial investment. For your convenience, you can make additional deposits in a number of ways, including in person, by mail or using the night deposit at our main office.  You can transfer funds from another account at the credit union by calling our office during regular business hours or 24 hours a day using MetroWeb or MetroTeller. You can also make regular deposits using payroll deduction.

 If you have funds deposited directly to another financial institution, you may also be able to initiate an automatic transfer of funds from that institution to Columbus Metro. Check with the institution receiving your deposit to see what sort of options they offer.

Q: When does the Education Growth Fund Certificate mature?

A: Because the funds in an Education Growth Fund Certificate are designated for higher education expenses, the certificate matures on the primary owner's 18th birthday. At that time, final dividends are credited to the account and the funds are automatically transferred to the member's primary share account. At that time, it will begin to earn dividends at the current rate for that account, assuming the minimum balance requirement is met.
 

RATES, FEES & PENALTIES

Q: The yield on this account is variable. What is it based on and when does it change?

A: The yield for this account is Prime Rate minus 2%. The yield and corresponding rate is subject to change at the beginning of each calendar quarter, (January 1, April 1, July 1 and October 1) of each year. Over the past 15 years, Prime Rate has fluctuated between 6.50% and 11.00%. Because of the way rates move in relation to Prime, the yield on the Education Growth Fund Certificate will almost always be higher than the rates on our other share certificates or savings accounts.

Click here for our current rates, including the rate for the Education Growth Fund Certificate.

Q: When are dividends credited to the account?

A: Dividends on the Education Growth Fund Certificate are compounded and credited monthly on the certificate's anniversary date. This means that a certificate opened on the July 10 will have dividends credited on August 10, September 10, October 10 and so on until maturity.

Q: Are there any monthly or annual fees for maintaining this account?

A: No. There are no fees associated with the Education Growth Fund Certificate. There is, however, a substantial penalty for early withdrawal (see the next question, below).

Q: Is there a penalty if I withdraw all or part the funds before the Education Growth Fund Certificate matures?

A: Yes, there is a substantial penalty for early withdrawal. That penalty is equal to 180 days' interest on the amount being withdrawn. There are no exceptions to this penalty, unless funds are withdrawn subsequent to the death of either the primary or joint account owner.
 

TAXES & OTHER CONCERNS

Q: What are the tax benefits and/or consequences of the Education Growth Fund Certificate?

A: There are no direct tax benefits to an Education Growth Fund Certificate. Contributions are not tax deductible and the dividends earned are taxable. However, since the account is in the child's name, earnings are taxable at their rate. In general, minors who have less than $700 in unearned (i.e. dividend or interest) income per year do not have to pay taxes on those earnings. You should check with your tax advisor about your particular situation. For more information, contact the Internal Revenue Service at 800.829.3676 and request Publication 929, Tax Rules for Children and Dependents. This publication can also be downloaded from the IRS web site at www.irs.gov.

Your credit union does offer the Coverdell Education Savings Account, which offers the potential for tax-free earnings. However, the Coverdell ESA allows contributions of just $2,000 per year per child. Furthermore, the ability to contribute to an Coverdell ESA phases out at certain income levels.

Q: Are the funds in my Education Growth Fund Certificate safe?

A: Yes, your funds are very safe; they're backed by up to $350,000 in deposit insurance. Accounts at Columbus Metro are insured up to $100,000 by the National Credit Union Administration, an agency of the federal government. We provide an additional $250,000 in insurance through Excess Share Insurance, the nation's largest private insurer. Your credit union is examined annually by the NCUA for safety and soundness, and a local accounting firm also audits the credit union's books annually.
 

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