FDIC vs NCUA Insurance
FDIC and NCUA are insurers of the deposits in banks or credit unions. When it comes to keeping your money safely for banking purposes, people have a choice of either banks or credit unions. What people look for is convenience, interest rates and of course customer services. What never gets talked about is the safety of the deposits in these two institutions. People never discuss how their money is safe and who insures their money. While deposits in bank accounts are insured by FDIC, the money in credit unions is insured by another agency called NCUA. Just what the difference between FDIC and NCUA is, and how do they look after the safety aspect of money deposited in different accounts?
The Federal Deposit Insurance Corporation (FDIC) was instituted by the government in 1933 to protect deposits made by customers in banks. The insurance provided by FDIC is fully backed by the federal government and all types of accounts are covered by FDIC whether they are savings, current, money market accounts or CD’s.
The insurance provided by FDIC is limited to the maximum limit per depositor. This means that if you hold two accounts in bank and both accounts have money equaling the limit prescribed by FDIC, only half of your money is actually insured. The current limits of money insured in different accounts are as follows.
Single account: $250000 per owner
Joint account: $250000 per co-owner
Certain retirement accounts: $250000 per owner
It is prudent to check whether the financial product being used by you is insured by FDIC or not. There are certain products like stocks, bonds, money market funds, T-bills, insurance products and annuities that are not covered by FDIC.
Under FDIC insurance, only your principal and the interest earned up to the limit prescribed by FDIC is safe, and if the amount exceeds the limit, it becomes vulnerable. Thus it is prudent to keep an eye on your account balance and withdraw to bring the balance within the prescribed limit to make the account safely insured. Again, not all banks are FDIC insured. So ensure that your bank is FDIC insured.
Credit Unions do not get the backing of FDIC. This does not make the money deposited in them any less safe as they are insured by another federal institution called National Credit Union Administration. NCUA supervises all accounts held under credit unions and also insures them. It is a fully government backed institution that operates National Credit Union Share Insurance Fund.
The limits up to which different types of accounts are insured under NCUA is practically the same as FDIC and individual accounts having amounts up to $250000 are insured by NCUA.
Difference between FDIC and NCUA
A major difference with FDIC insurance lies in the fact that it extends to share and draft accounts which is not there in case of FDIC insurance. Just like FDIC, NCUA insurance does not apply to shares, mutual funds, annuities etc. It is always better to ask the credit union about the coverage of the type of account you are holding.
Another thing to look for is whether your credit union is insured by NCUA or not. Only federal credit unions have got the backing of NCUA but most of the state credit union opt to be covered by NCUA. Only about 5% of the state credit unions are at present insured by private companies.
In general people know more about FDIC than NCUA because a vast majority of people operate their money through banks and not credit unions. But with many banks having failed of late has made people look up at credit unions and thus the insurance provided by NCUA has become a talking point these days. Credit unions may be smaller in size compared to banks; the money deposited in them is by no means less safe than that deposited in banks.