Credit unions are not-for-profit financial institutions that are owned by their members. This enables credit unions to charge lower interest rates on loans and pay higher yields on savings accounts. Nonetheless, the bigger question is if your money safe in a credit union. This article highlights five things explaining how your money is protected in a credit union.
1. Banks and credit unions are federally insured
The Federal Deposit Insurance Corporation (FDIC) insures traditional banks. Credit unions, which are not considered traditional banks, are federally insured by the National Credit Union Share Insurance Fund (NCUSIF). The NCUSIF is supervised by the National Credit Union Agency (NCUA), an independent federal agency. All credit unions that are protected by the NCUSIF must display the official NCUA logo in any location where an account can be opened, such as physical branches and their websites.
2. FDIC and NCUSIF offer the same coverage
FDIC and NCUSIF insurance provide up to $250,000 of coverage per depositor per institution. If you have less than $250,000 at any insured institution, you’re covered —and you might even be below the limit if you have more than that, depending on what type of accounts you have. For example, if you have an IRA and a checking account at the same credit union, you might receive more than $250,000 of coverage at that institution. Additionally, if you have $250,000 deposited at one credit union and $100,000 at another, all your money would be protected by the NCUSIF.
3. Safe for cash and cash-like holdings
NCUA insurance generally covers checking accounts, savings accounts, money market accounts (but not money market funds), certificates of deposit (CDs), IRAs held in share accounts at the credit union, revocable trust accounts, and irrevocable trust accounts. To find out exactly how much coverage your accounts have, use NCUA’s Share Insurance Estimator. After listing each account registration (such as an IRA, business account, or joint account), you’ll get a detailed report of your coverage, and you can identify any gaps. The NCUA does not cover non-share accounts such as brokerage accounts, insurance products, or safe deposit box contents.
4. Government as a guarantee
The NCUSIF has the full backing of the U.S. government if an insured credit union fails and provides share insurance coverage for credit union members against losses. Suppose your federally insured credit union fails, and the pool of money in the NCUSIF is exhausted. In that case, the U.S. government promises to come up with any funds needed to replace your savings.
5. Backed by private insurance
Some credit unions are not federally insured. Such credit unions have private insurance. These institutions are often safe, but they don’t have the backing of the U.S. government. While the private deposit insurance these state-chartered institutions carry can protect account holders’ money, having accounts backed by the NCUSIF might make some credit union members feel more confident about the safety of their money. At the same time, some credit unions insured by the NCUA also carry private insurance to provide customers with higher coverage limits than the standard $250,000, which can benefit those who’d like to keep more money in one credit union.
Conclusion
According to the NCUA, no credit union member has lost money in federally insured accounts at a credit union. At the same time, those interested in joining a credit union should know that not all credit unions are NCUA-insured. An account holder at any credit union or bank should know which accounts are and are not insured to protect money. They should also understand how multiple deposit accounts at one institution are insured.
Key Takeaways
- Banks and credit unions are federally insured
- FDIC and NCUSIF offer the same coverage
- Safe for cash and cash-like holdings
- Government as a guarantee
- Backed by private insurance
