NCUA: What It Is And How It Keeps Your Money At Credit Unions Safe (2024)

The collapses of Silicon Valley Bank and Signature Bank have left consumers wondering what happens if their banks fail.

The Federal Deposit Insurance Corp. (FDIC) is the agency that insures deposits at member banks, but the National Credit Union Administration (NCUA) is the government agency that protects credit union members’ share accounts. While accounts at credit unions and banks are insured differently, both federal agencies have similar rules and processes, and even have the same cap on how much of a depositors’ funds are insured.

Here’s what you need to know about the NCUA and how much it insures per account.

What is NCUA insurance?

One of the NCUA’s responsibilities is managing the National Credit Union Share Insurance Fund (NCUSIF). It is the NCUSIF that guarantees money in credit union accounts is backed with the full faith and credit of the U.S. government.

For all federal credit unions and most state-chartered credit unions, the NCUSIF provides up to $250,000 in coverage for each single ownership account.

How does NCUA insurance work?

When a credit union fails, the NCUA is responsible for managing and closing the institution. The NCUA’s Asset Management and Assistance Center liquidates the credit union and returns funds from accounts to its members. The funds are typically returned within five days of closure. Sometimes, the NCUA may use the liquidated funds to pay off any outstanding loans of the account holder.

With that said, it’s unlikely that a credit union will need to be liquidated by the NCUA. That noted, NCUA insurance is crucial in keeping depositors afloat when a credit union fails.

Outright liquidation of credit unions, in which the institution is closed for good and members get payments in the mail to cover their share-account balances, are fairly rare, says Tom Glatt, a credit union strategy consultant and founder of Glatt Consulting Group.

“Usually what the NCUA tries to do is, if the credit union has a fair number of problems and is not going to survive on its own, they’ll try to find another credit union partner that can take on that institution so that the members themselves don’t see any disruption,” he says.

Accounts at credit unions backed by the NCUA are automatically insured, and members don’t need to take any extra steps to ensure that their money is protected.

What are the limits on NCUA insurance and how can you get the most from it?

Limits on federal insurance for credit unions vary for single and joint accounts.

The NCUSIF covers up to $250,000 of the total balance of individuals’ credit union accounts. For example, if Fred has $150,000 in a savings account and $100,000 in a money market account at the same credit union, the total amount of his deposits doesn’t exceed $250,000, so he is fully insured by the NCUA.

For jointly owned accounts, the NCUSIF insures an additional $250,000 for each account holder. Joint account insurance is separate from insurance for single ownership accounts. For example, if Fred is married to Mary and they jointly own a savings account, that savings account is insured up to $500,000 — $250,000 for each account holder. Since Fred has a total of $250,000 in his single ownership accounts, he will still be insured that amount regardless of how much money is in the joint savings account. With the single ownership accounts and the joint account combined, Fred has up to $750,000 federally insured.

Single ownership accounts with beneficiaries do not qualify for joint account insurance. The NCUA does, however, offer separate insurance for trust accounts, which are accounts managed by a designated person or firm on behalf of one or more beneficiaries. Each beneficiary named on such accounts may qualify for an additional $250,000 in insurance coverage.

The NCUA doesn’t insure money invested in:

  • Mutual funds
  • Stocks
  • Bonds
  • Life insurance policies
  • Annuities

The NCUA website provides a share insurance estimator to help consumers determine whether all of their assets are insured.

NCUA vs. FDIC

Both the NCUA and FDIC are responsible for insuring funds in the event that a financial institution fails.

The NCUA insures credit union accounts, while the FDIC provides federal insurance for bank accounts. They both come with the same limits on insurance coverage. A decision about whether to store money in a credit union or bank shouldn’t be affected by which federal agency insures the institution.

Credit unions not insured by NCUA

Though all federal and most state-chartered credit unions have coverage from the NCUA, there are a few exceptions. State-chartered credit unions are regulated by the state, as opposed to the NCUA, and may or may not have federal insurance. If a state-chartered credit union doesn’t have federal insurance, it will be privately insured and therefore not backed by the federal government.

Some private insurers may offer higher amounts of coverage than the NCUA, though this coverage doesn’t have the full protection of the U.S. government. Find out if a credit union is federally insured through the NCUA website’s searchable database.

Lastly, even if a credit union is insured, that doesn’t mean every penny of their deposits are covered. As with the FDIC, the NCUA has a cap of $250,000 per depositor, per account. Thus, it’s entirely possible for an insured credit union to have sizable deposits that aren’t covered.

In the wake of the Silicon Valley Bank collapse, the FDIC announced it would pay back all depositors, insured or not. It’s possible that in the event of a similar credit union collapse, the NCUA would do the same thing. However, you should assume you’ll only get the limit allowed by law to ensure you’re covered. Because there may be different factors included in the collapse of a bank versus a credit union, the NCUA may not take the same course of action.

Bottom line

If your money is in a federally insured credit union share account, its safety in the event of a closure is relatively guaranteed so long as you’re within NCUA guidelines.

The $250,000 limit on NCUA insurance may affect some members, but even then, it’s possible to distribute funds so that they are entirely insured, such as by having money in a joint ownership account or by keeping some money in a bank account.

— Bankrate’s Marcos Cabello contributed to an update of this story.

NCUA: What It Is And How It Keeps Your Money At Credit Unions Safe (2024)

FAQs

NCUA: What It Is And How It Keeps Your Money At Credit Unions Safe? ›

NCUA insurance guarantees that you'll receive the money that you're entitled to from your deposit account if your credit union goes under. It guarantees up to $250,000 per person, per institution, per ownership category. The NCUA is a federal agency created by Congress to regulate credit unions and insure your money.

What is the NCUA and what does it do? ›

The National Credit Union Administration, commonly referred to as NCUA, is an independent agency of the United States government that regulates, charters and supervises federal credit unions. NCUA also operates and manages the National Credit Union Share Insurance Fund (NCUSIF).

Is my money safe with NCUA? ›

Just like the FDIC, the NCUA insures up to $250,000 to all credit union members and provides protection in the event of a credit union failure.

Is your money safe at a credit union? ›

Like banks, which are federally insured by the FDIC, credit unions are insured by the NCUA, making them just as safe as banks. The National Credit Union Administration is a US government agency that regulates and supervises credit unions.

How long does NCUA have to pay you back? ›

If the member shares are not assumed by another credit union, all verified member shares are typically paid within five days of a credit union's closure. No member of a federally insured credit union has ever lost a penny in insured accounts.

What does NCUA protect? ›

NCUA insurance guarantees that you'll receive the money that you're entitled to from your deposit account if your credit union goes under. It guarantees up to $250,000 per person, per institution, per ownership category. The NCUA is a federal agency created by Congress to regulate credit unions and insure your money.

Is a credit union safer than a bank? ›

Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.

Are credit unions safe from collapse? ›

Credit unions are insured by the National Credit Union Administration (NCUA). Just like the FDIC insures up to $250,000 for individuals' accounts of a bank, the NCUA insures up to $250,000 for individuals' accounts of a credit union. Beyond that amount, the bank or credit union takes an uninsured risk.

What happens if a credit union fails? ›

When your money is in a bank insured by the FDIC, or a credit union insured by the NCUA, your money (up to $250,000 per unique account) is protected even if the bank or credit union fails or goes out of business.

How much money does NCUA protect? ›

The National Credit Union Share Insurance Fund was created by Congress in 1970 to insure members' deposits in federally insured credit unions. Each credit union member has at least $250,000 in total coverage. Administered by the NCUA, the Share Insurance Fund insures individual accounts up to $250,000.

Are credit unions safer than banks during a recession? ›

bank in a recession, the credit union is likely to fare a little better. Both can be hit hard by tough economic conditions, but credit unions were statistically less likely to fail during the Great Recession. But no matter which you go with, you shouldn't worry about losing money.

Should I keep all my money in a credit union? ›

Federally insured credit unions and banks are both safe places to keep your money. The National Credit Union Administration protects deposits (within certain limits) at insured credit unions and the Federal Deposit Insurance Corp. protects deposits (within certain limits) at insured banks.

Which is safer, FDIC or NCUA? ›

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.

Are any credit unions at risk of failing? ›

Experts told us that credit unions do fail, like banks (which are also generally safe), but rarely. And deposits up to $250,000 at federally insured credit unions are guaranteed, just as they are at banks.

What happens to my money if my credit union closes? ›

The NCUA will send you a letter notifying you if your credit union closes and will return your funds within five days of closing. If your balance exceeds $250,000, you'll need to complete a Member Confirmation and Affidavit form to receive any funds over the insured limit.

What is the major difference between the FDIC and NCUA? ›

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.

What is not covered under NCUA? ›

The NCUA does not insure money invested in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities, even if these investment or insurance products are sold at a federally insured credit union.

How does the NCUA make money? ›

The NCUA's operating budget is funded exclusively by the credit unions it regulates and insures. As such, every dollar spent by the agency has a direct impact on the daily operations of credit unions, and is an additional dollar that cannot be used toward the benefit of their members.

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