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NCUA vs. FDIC: What’s the Difference?


Written by C. Saint-Denys | Edited by Ali Cybulski | Published on 6/4/2024

 

The National Credit Union Administration (NCUA) and the Federal Deposit Insurance Corp. (FDIC) are both federal agencies charged with the task of insuring deposits. Each provides government-backed insurance, and coverage is automatic with a federally insured bank or credit union. The FDIC insures banks and the NCUA insures credit unions.

You’ll want to know how coverage works — and how to maximize it — before you open an account.

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What is the NCUA?

The NCUA regulates, charters and supervises federal credit unions. It also operates and manages the National Credit Union Share Insurance Fund (NCUSIF), which covers credit union members against losses if their credit union fails.

The NCUSIF provides all members of federally insured credit unions with $250,000 in coverage for a single ownership account, or an account owned by one person with no beneficiaries.

If you want to verify that your credit union is federally insured, you can use the NCUA’s Credit Union Locator tool.

All federally insured credit unions are also required to display the official NCUA insurance sign on webpages where they open accounts or accept membership fees. In addition, the sign must be displayed at each teller station in the principal place of business and in all branches.

Most credit unions are federally insured: They account for about 98% of all credit unions in the U.S. There were 4,604 federally insured credit unions in the fourth quarter of 2023, according to the most recent NCUA Quarterly Credit Union Data Summary.

No credit union may end its federal insurance without first notifying its members.

What is the FDIC?

The FDIC protects bank customers against the loss of deposits if their federally insured institution fails. FDIC insurance is backed by the U.S. government and is automatic for any deposit account opened at an FDIC-insured bank.

FDIC deposit insurance only covers certain deposit products, such as checking and savings accounts, money market accounts, and certificates of deposit (CDs). Mutual funds, annuities, life insurance policies and stocks and bonds are not covered by FDIC insurance.

The standard deposit insurance amount is $250,000 per depositor, per FDIC-insured bank, per ownership category. A bank ownership category simply refers to who owns the account and can include a single account (you) or a joint account (e.g., you and your spouse), among other categories.

You can have more than $250,000 of coverage at one FDIC-insured bank because deposits in different ownership categories are separately insured up to at least $250,000. The FDIC’s Electronic Deposit Insurance Estimator (EDIE) can calculate your insurance coverage after you enter details on your accounts.

To determine whether your bank is FDIC-insured, you can ask a bank representative, look for the FDIC sign at your bank or use the FDIC’s BankFind tool. You can also submit a request using the FDIC Information and Support Center, or call 877-275-3342.

There were 4,587 FDIC-insured institutions as of Dec. 31, 2023, the most recent FDIC data available.

How does NCUA insurance work?

NCUA insurance covers many types of accounts at a federally insured credit union, including share savings accounts, share draft accounts (checking accounts) and share certificates (CDs).

The NCUA does not insure investments in stocks, bonds, mutual funds, life insurance policies, annuities or municipal securities.

Funds have historically been available to members within a few days after the closing of an insured credit union. However, failures of federally insured credit unions are rare because only those with sound operational standards qualify for NCUSIF coverage.

No member of a federally insured credit union has ever lost any of their insured savings.

What are NCUA insurance limits?

The NCUSIF provides all members of federally insured credit unions with $250,000 in coverage for single ownership accounts, including share savings accounts, share draft accounts, money market accounts and share certificates. Individuals with account balances totaling $250,000 or less at the same insured credit union are fully insured.

You may qualify for more than $250,000 in coverage at one insured credit union if you have accounts in different ownership categories. Categories include:

  • Single ownership accounts, which are owned by one person with no beneficiaries and covered up to $250,0000.
  • Joint ownership accounts, which are owned by two or more people with no beneficiaries and covered up to $250,000.
  • IRAs and certain other retirement accounts, which are covered up to $250,000.
  • Revocable trust accounts, which are insured up to $250,000 for each eligible beneficiary named or identified in the revocable trust, subject to limitations and requirements.
  • Irrevocable trust accounts, which are insured up to $250,000 for each beneficiary named or identified in the irrevocable trust, subject to limitations and requirements.

If you need to increase your coverage, you can open an account at another federally insured credit union. Member accounts at each federally backed credit union are insured separately from accounts held at another federally backed credit union.

You cannot increase insurance coverage by placing funds at different branches of the same federally insured credit union. A main office and all branch offices are considered one credit union for insurance purposes.

Using different Social Securing numbers, rearranging the order of names listed on accounts or substituting “and” for “or” in joint account titles does not affect insurance coverage, according to the NCUA.

NCUA vs. FDIC

NCUA and FDIC coverage is essentially the same, with one main difference: The NCUA insures credit unions, and the FDIC insures banks. Both share the goal of protecting deposit accounts. Here’s a side-by-side look at the two.

How do NCUA and FDIC insurance compare?
NCUA FDIC
Institutions covered Federally insured
credit unions
Federally insured banks and savings associations
Coverage limits $250,000 per member, per insured credit union, per account ownership category $250,000 per depositor, per insured bank, per account
ownership category
Covered accounts Share savings accounts, share draft accounts (similar to checking), money market accounts and share certificates Checking accounts, Negotiable Order of Withdrawal (NOW) accounts, savings accounts, money market accounts, CDs, cashier’s checks, money orders and other official items issued by a bank
Backed by U.S. government U.S. government

What happens if your financial institution fails?

Though it’s unlikely, a bank or credit union might fail. You’ll want to have a general idea of how the FDIC or NCUA responds when this occurs.

NCUA:

The NCUA either transfers your account to another federally insured credit union or gives you a check equal to your insured account balance. You’ll receive the principal and dividends, up to the insurance limit, through the date of the credit union’s liquidation.

Federal law requires account holders to be paid “as soon as possible” upon the failure of a federally insured credit union, according to the NCUA. Insured funds are typically available to members within a few days after the closure of an insured credit union.

Note that you may be able to recover a portion of uninsured deposits, but you’re not guaranteed to recover more than the insured amount. The amount you receive may depend on the recovery of the failed credit union’s assets, and that process may take several years to conclude.

FDIC:

The FDIC either provides each depositor with an account at another insured bank in an amount equal to the insured balance at the failed bank or issues a check to the depositor for the insured balance.

You can expect one or the other to occur within a few days after a bank closing, but usually the next business day. The FDIC may need additional time in certain situations — for example, when deposits exceed $250,000 and are linked to trust documents — to determine the amount of insurance coverage.

If you have funds that exceed the insured limit, you may receive a portion of those from the sale of failed bank assets — but that process can take several years. As assets are sold, depositors with uninsured funds usually receive periodic payments on remaining claims.

Is FDIC or NCUA insurance better?

The main difference between FDIC insurance and NCUA insurance is the financial institution that each serves. The FDIC insures deposits for bank customers and the NCUA insures deposits for credit union members.

Your decision is really between a bank or a credit union. You can rest easy that as long as you choose a federally insured institution, your money will be protected.

Know the limitations of FDIC and NCUA coverage, and make sure you maximize coverage across categories.



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