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The NCUA is the National Credit Union Administration, an independent federal agency that was created by Congress in 1970. The NCUA’s job is to regulate federal credit unions and insure deposits up to certain limits in order to protect credit union members. The NCUA is similar to the FDIC except that it oversees federal credit unions rather than banks.
What Is NCUA Insurance?
NCUA insurance is funded through the National Credit Union Share Insurance Fund, which was established in 1970 at the same time the NCUA itself was founded. Individual depositors are insured for at least $250,000 in coverage. Here's how that coverage breaks down based on the type of account and the type of account holder.
Individual accounts: insured up to $250,000
All of a member's combined joint accounts: insured up to $250,000
IRA and KEOGH retirement accounts: insured up to $250,000
Extra coverage provided for trust accounts
Depending on the types of accounts someone has, they could enjoy $750,000 or potentially even more in insurance coverage from the NCUA. To maximize your coverage, pay attention to how your balances are spread out across different types of accounts. Recommended: Guide to Checking Accounts
How Does NCUA Insurance Work?
The NCUA's insurance is funded by the credit unions themselves. If a credit union is federally chartered, it is required to purchase NCUA insurance. State-chartered credit unions can choose to get NCUA insurance coverage or purchase their own private insurance policy.Eligible accounts are covered in the event the credit union fails and doesn't have enough cash on hand to cover members' account balances. In some cases, the credit union could be liquidated, in which case member accounts (including deposits and loans) may be sold to another credit union. In that case, all of those accounts are transferred to the new financial institution.If that doesn't work, then NCUA insurance kicks in. Members are sent a check for their covered amounts, including any dividends earned through the date of the credit union's closure. As far as when you’ll receive your check, there's no legal timeline other than "as soon as possible." But in the past, the NCUA has sent out checks within a few days.
Are Credit Unions Insured by the Government?
Yes, federally chartered credit unions are insured by the federal government. Check for the NCUA logo and fine print on the credit union's website to confirm its insurance status.At the end of 2022, the NCUA insured $2.17 trillion assets held in credit union accounts. Credit union membership also reached 135.3 million by December 2022. If you're not sure which of your credit union deposits are federally insured, use the NCUA's Share Insurance Estimator. This lets you look up eligible credit unions and account types for a valuation on your insurance coverage.
NCUA vs FDIC
There are many similarities, as well as core differences, when comparing NCUA vs. FDIC insurance. To start, the FDIC is older than the NCUA, having been established in the early 1930s. It stands for "Federal Deposit Insurance Corporation" and insures banks instead of credit unions. Like NCUA insurance, FDIC insurance coverage includes a $250,000 limit based on account type and type of account holder. However, some banks opt for even more coverage for their customers.Both the NCUA and FDIC are backed by the federal government, and they both have a perfect track record of reimbursing every penny covered by their insurance policies. Not sure which type of insurance coverage your financial institution has? Use the FDIC "Bank Find" tool or the NCUA's Credit Union Lookup to determine which agency your accounts are covered by.
Are Credit Unions FDIC-Insured As Well?
No, credit unions are not FDIC-insured. Federally-chartered (and some state-chartered) credit unions are overseen by the NCUA, which is like a cousin to the FDIC. They're in the same family, but the organization structure is different.One of the standout features of credit unions is that they are member-owned and not-for-profit. Credit union members get to vote and can volunteer to serve on the board of directors.Instead of distributing profits to shareholders like a for-profit bank, credit union profits are integrated back into the financial institution through lower financing interest rates and fees, as well as higher yields for savings accounts.However, not everyone can join any credit union. There must be some kind of common bond, such as geography, employer, or even a charitable contribution to a specific cause.All of these differences cause credit unions to be regulated differently than a for-profit bank, which is why they are insured by the NCUA rather than the FDIC.
What Accounts Are Covered by the NCUA?
There are restrictions on what is covered by the NCUA. In addition to the $250,000 limits discussed earlier, NCUA insurance only covers deposit accounts. That includes:
Be sure to understand all of your account types so you don't incorrectly assume everything is covered in the event the credit union fails.Recommended: 7 Different Types of Savings Accounts
The Takeaway
The NCUA is an important part of the federal safety net of the banking system. There has never been an instance where a covered account did not receive funds when a credit union was liquidated. Therefore, you can feel confident that your money is safe in a federally-chartered credit union.The trick is to understand which of your accounts are covered and up to how much. There are several scenarios that allow $250,000 in coverage, which means you could have multiple accounts at a credit union that are eligible for the maximum amount.In order to find the best high interest savings accounts while remaining federally insured, consider Lantern. Lantern can help make sure you avoid fees and maximize your interest earned.Compare high interest online savings accounts and find today’s best rate with Lantern.
Frequently Asked Questions
Is NCUA just as safe as FDIC?
How much money is insured by NCUA?
Does NCUA cover checking accounts?
Photo credit: iStock/Makhbubakhon Ismatova
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About the Author
Lauren Ward
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
