You may not have given much thought to the financial security of your bank, but recent high-profile bank closures have brought this serious issue to light. So far in 2023, four banks have closed—Silicon Valley Bank, Signature Bank, First Republic Bank and Heartland Tri-State Bank—making more people concerned about how their money is protected.
You likely know that the Federal Deposit Insurance Corporation (FDIC) insures bank deposits, but what if you use a credit union? Don’t worry—your money is still insured by the National Credit Union Administration (NCUA), an independent federal agency regulating credit unions. And the best news is that FDIC and NCUA insurance protect your hard-earned cash the same way and up to the same limits.
What is NCUA insurance?
The National Credit Union Association (NCUA) is a federal agency that insures credit union deposits and protects members. The organization also enforces regulations impacting approximately 4,700 federally insured credit unions in the U.S.
NCUA insurance backs all deposit accounts at credit unions. The National Credit Union Share Insurance Fund (NCUSIF) is the actual name of the insurance program for member deposits in federally insured credit unions, but it's commonly referred to as NCUA insurance. NCUA insurance means that deposit accounts at credit unions are backed by the full faith and credit of the U.S. government up to established limits.
"Nobody's ever lost any money or deposit at a federally insured credit union," said Schenk.
How does NCUA insurance work?
NCUA insurance applies if a federally insured credit union fails. And you don't need to sign up for protection or purchase coverage. Instead, funds on deposit in qualifying accounts are automatically insured.
NCUA insurance applies to a variety of savings and deposit accounts, including:
- Savings accounts
- Checking accounts
- Money market accounts
- Certificates of deposit (CDs)
- Traditional or Roth IRAs
It’s important to note that the NCUSIF doesn’t cover money invested in mutual funds, stocks, bonds, life insurance or annuities, even if you opened them with a credit union.
NCUA insurance limits
NCUA provides at least $250,000 in total coverage for all members of federally insured credit unions. The $250,000 limit applies per depositor and per account type and ownership category. For instance, if you have an individual savings account with $250,000 plus a joint checking account with a $250,000 balance, you’re fully insured for both as they’re different ownership categories (individual vs. joint).
Other credit union account types eligible for NCUA insurance include trusts and certain retirement accounts holding deposit products like IRA share certificates and IRA savings accounts.
| NCUA insurance limits by ownership category | ||
| Ownership category | Included account types | Coverage limit |
| Individual accounts | Checking, savings, money market accounts in one person's name | $250,000 |
| Joint accounts | Checking, savings, money market accounts in two people's names | $250,000 |
| Trust accounts | Formal or informal revocable trusts | $250,000 |
| Retirement accounts | Traditional IRA, Roth IRA, Keogh Plan/HR 10 | $250,000 |
If you have multiple accounts in several categories with the same credit union, your total coverage limit may be higher.
For example, let's say you had the following accounts:
- $50,000 in an individual savings account
- $25,000 in a joint money market account
- $265,000 in an individual Roth IRA
- $25,000 in a trust account
In total, you have $365,000 deposited with the credit union. Because you have accounts in different ownership categories, you have more than $250,000 in total coverage. You're fully insured for the savings, joint money market, and trust account; all three are separate ownership categories and have balances under the $250,000 limit. However, you're only insured for $250,000 of your $265,000 IRA balance, leaving $15,000 uninsured.
So you don't run afoul of NCUA insurance limits, be sure to use the Share Insurance Estimator tool from MyCreditUnion.gov to calculate limits for each account. If you have individual account balances of more than $250,000, consider spreading your money across multiple credit unions to ensure you’re fully insured.
NCUA vs. FDIC
The NCUA and FDIC are very similar; they provide government-backed deposit account insurance. While the NCUA applies to federally insured credit unions, the FDIC insures bank deposits.
"The NCUA is federal insurance for credit union members that offers the same safety and security that the FDIC offers to consumers," said Samantha Beeler, president of the League of Southeastern Credit Unions.
As with the NCUA, the FDIC insures deposits per account holder and ownership category up to a maximum of $250,000. The FDIC covers the same accounts as the NCUA, including savings, checking, certificate and retirement accounts.
One of the only differences between NCUA and FDIC coverage is that the FDIC will also insure cashier's checks and money orders. Otherwise, banks and credit unions are equally protected, and your deposit accounts are safe with either option.
Something interesting to note is that credit unions insure a higher percentage of their deposits than banks do; approximately 90% of credit union deposits are insured. Does that mean that credit unions are safer than banks? Not necessarily; according to Beeler, the discrepancy comes down to the audiences that credit unions serve.
"[Credit unions] have a lot more consumer accounts than our banking counterparts who concentrate a lot on serving commercial parts of the community," she said.
The takeaway
If you were thinking of opening an account with a credit union but were worried about how safe your money would be, you can rest assured that federally insured credit unions are just as safe as FDIC-insured banks. And if you're considering taking out a personal loan or opening a new savings account, keep credit unions in mind.
"My best piece of advice would be whenever you're looking for any financial product or service, whether it's a deposit account or a loan, be sure to shop around number one and ask questions," said Schenk. "And then always, always include a credit union in those shopping plans because the pricing is just so much more consumer-friendly, and more than likely, people will save a lot of money by doing that."
