The National Credit Union Administration (NCUA) and the Federal Deposit Insurance Corporation (FDIC) are separate federal organizations that provide deposit insurance to their members. The FDIC usually protects bank deposits up to $250,000, with some exceptions; the NCUA offers similar protection but for credit unions instead of banks.
FDIC or NCUA member institutions provide this coverage with various bank accounts, and account holders do not need to apply for or qualify for it. It does not cover investment products or losses; rather, it protects deposits if the institution fails.
Although the functions of these two organizations are identical for customers, they function somewhat differently and offer somewhat different advantages to account holders. Before you get a bank or credit union account, you might find it helpful to know how each functions and what benefits they provide.
What is FDIC?
The Federal Deposit Insurance Corporation is referred to as FDIC. During the Great Depression, President Franklin D. Roosevelt signed the Banking Act of 1933, creating the Federal Deposit Insurance Corporation.
“Maintain stability and public confidence in the nation’s financial system” is the FDIC’s primary goal. The United States government backs the FDIC with its full faith and credit, and the FDIC insures consumer deposits as part of its mandate.
For each type of account ownership, the FDIC insures $250,000 per depositor, per insured bank. Single account holders, joint accounts, and other accounts, such as revocable and irrevocable trusts are all included in the “account ownership category.”
If you have a sizable sum of money in a bank, you probably want to be aware that certain institutions take part in schemes that increase the FDIC’s insurance coverage to millions.
The FDIC claims that a bank failure has not resulted in a depositor losing any money on FDIC-insured deposits.
What is NCUA?
The National Credit Union Administration is referred to as NCUA. Despite the fact that the United States had around 10,000 credit unions by 1960 and the country’s first credit union opened its doors in 1909, Congress did not establish the National Credit Union Administration until 1970.
Similar to the FDIC, the NCUA’s mission is to safeguard members who own credit unions and insure deposits made by credit union members. (Members own credit unions, and they operate as not-for-profit organizations.)
The NCUA, like the FDIC, backs deposits with the full faith and credit of the United States government and guarantees up to $250,000 per share owner, per insured credit union, for each account ownership category, including share accounts and some IRAs and trusts.
The NCUA claims that no member has ever lost a single cent from accounts insured by the NCUA, matching the FDIC’s record.
While state-chartered credit unions follow state-specific rules, all federally chartered credit unions are members of the NCUA. However, the NCUA also provides insurance for a large number of state-chartered credit unions.
FDIC vs. NCUA Insurance: Key Similarities and Differences
What distinguishes the NCUA from the FDIC, then? The consumers that the FDIC and NCUA safeguard are the primary distinction between them. While the NCUA covers deposits for credit union members, the FDIC insures deposits for bank clients. You probably won’t notice a difference in your day-to-day banking as a financial institution customer.
Actually, discussing all the similarities between the FDIC and NCUA is simpler. These commonalities (and slight variations) are examined in the table below.
| FDIC | NCUA | |
|---|---|---|
| Established Year | 1933 | 1970 |
| Type of Financial Institution | Banks | Credit Unions |
| Amount of Insurance | $250,000 for each category of account ownership, every insured bank, and per depositor | $250,000 for each category of account ownership, per insured credit union, and per share member |
| What all are Insured? | Checking Accounts Savings Accounts Money Market Accounts Time deposits, similar to CDs Additional deposit accounts | Share Draft (Checking) Accounts Shared Savings Accounts Money Market Accounts Accounts with certificates (like CDs) Additional deposit accounts |
| What all are not insured? | Bonds and Stocks Mutual funds Annuities Treasury securities Policies for life insurance Safe Deposit Boxes (or contents) | Bonds and Stocks Annuities Mutual funds Policies for life insurance Safe Deposit Boxes (or contents) |
| Types of Ownership | Single ownership Joint or Co-ownership Account of Revocable Trust Account of irrevocable trust IRAs and other retirement accounts Accounts for employee benefit plans Corporations, partnerships, and unincorporated Associations Accounts Accounts of the Government | Single ownership Joint or Co-ownership Account of Revocable Trust Account of irrevocable trust Some retirement accounts (such as KEOGHs and IRAs) Accounts for employee benefit plans |
What Does NCUA Insurance Cover?
The National Credit Union Share Insurance Fund (NCUSIF) provides NCUA coverage. The NCUSIF provides insurance for the following account types:
- Share draft accounts, often known as checking accounts.
- Savings accounts for shares
- Money market deposit accounts
- Share certificates, such as deposit certificates
What Does NCUA Not Cover?
You may rely on coverage up to $250,000 for standard accounts like a checking or savings account if your credit union has insurance via the NCUA. Nevertheless, NCUA insurance excludes:
- Stocks
- Bonds
- Mutual funds
- Annuities
- Life insurance
- Deposit boxes that are safe (or their contents)
What Is Protected by FDIC Coverage?
Account types that are similar to those protected by the NCUA are covered by FDIC insurance:
- Checking accounts
- Accounts for savings
- Accounts for money market deposits
- Time deposits, such as certificates of deposit
Additionally, the FDIC states that its insurance covers cashier’s checks, money orders, Negotiable Order of Withdrawal (NOW) accounts, and other locally issued bank products.
What Is Not Protected by FDIC Insurance?
The NCUA’s and the FDIC’s coverage exclusions are comparable. FDIC-provided insurance does not cover:
- Stocks
- Bonds
- Mutual funds
- Annuities
- Treasury securities
- Life insurance
- Deposit boxes that are safe (or their contents)
However, Treasury securities are “backed by the full faith and credit of the U.S. government,” which includes bonds, notes, and bills.
How to Identify If Your Institution is Insured by FDIC or NCUA?
So how can you find out if a bank has FDIC insurance? The FDIC offers a few simple choices:
- Make a call and ask: The FDIC has a toll-free number. Their number is 1-877-275-3342.
- Check online: You can look for banks that are insured by the FDIC using their “Bank Find” database.
- Look for signage: Look for official FDIC signage as soon as you enter a physical bank location.
- Visit the bank’s website: If digital banking is your preference, visit the bank’s website and verify ‘Member FDIC’ in the footer for confirmation of insurance.
In a similar way to a bank, it’s straightforward to check if the NCUA insures a credit union:
- Check online: Visit the NCUA website to see a full list of credit unions that are federally insured.
- Look for any signs: Like the FDIC; the NCUA mandates that federally insured credit unions display NCUSIF signage to show insurance coverage in their branches, offices, and marketing.
- Browse the credit union’s website: Like banks for the FDIC, federally insured credit unions will have NCUA language in the footer of their websites.
Keep in mind that not all state credit unions have federal insurance. If a credit union’s name contains the word “federal,” the NCUA automatically insures it.
Are All Banks Protected by FDIC Insurance?
The FDIC insures most banks, but not all. Banks that do not have FDIC insurance are likely to have state insurance; hence, savings are generally secure. Before making a deposit, make sure you have researched the bank and its insurance policies.
Are All Credit Unions Protected by NCUA Insurance?
Not all credit unions have NCUA insurance. Federal credit unions are automatically covered, while state credit unions must choose NCUA share insurance. If they don’t, the state usually provides insurance. As with banks, it’s smart to check a credit union’s insurance and how it affects your money before opening an account.
In summary, both the FDIC and NCUA play crucial roles in protecting depositors’ funds, offering peace of mind and financial stability. While the FDIC insures deposits at banks and the NCUA protects credit union members, both agencies provide up to $250,000 in coverage per depositor. Knowing these protections allows you to successfully manage your finances with safe institutions.