What Are the Differences Between FDIC and NCUA Insurance?

The Federal Deposit Insurance Corporation (FDIC) and National Credit Union Administration (NCUA) are independent federal agencies that focus on insuring their customers’ deposits. The FDIC insures deposits at banks typically up to $250,000 per depositor, per account ownership category, per insured institution (though there are exceptions); the NCUA offers similar insurance and consumer protection but at credit unions.

Account holders don’t have to apply or qualify for this coverage; it is automatically provided with different deposit accounts, assuming the institution is an FDIC or NCUA member. The goal is to cover deposits in the rare instance that an institution were to fail; these programs don’t cover investment products or losses.

While these two entities serve similar purposes for consumers, they operate somewhat differently. Read on to learn more.

What Is the FDIC?

The Federal Deposit Insurance Corporation (FDIC) is over 90 years old. President Franklin D. Roosevelt established the Federal Deposit Insurance Corporation when he signed the Banking Act of 1933 amid the Great Depression.

The main purpose of the FDIC is to “maintain stability and public confidence in the nation’s financial system.” As part of that remit, the FDIC states that it insures consumer deposits and is “backed by the full faith and credit of the United States government.”

The FDIC typically insures $250,000 per depositor, per insured bank, per account ownership category. “Account ownership category” refers to single-holder accounts, joint accounts, and other bank accounts, and may also cover bank deposits held in individual retirement accounts (IRAs) and trusts (see table below).

If you are a person who keeps a considerable amount of money in a bank, whether in checking or savings accounts, you may want to know that some banks participate in programs that extend the FDIC insurance to cover millions, usually by dividing the assets into holdings of no more than $250,000 each among separate banks.

According to the FDIC, a depositor has not lost a single penny of FDIC-insured deposits because of a bank failure.

What Is the NCUA?

NCUA stands for National Credit Union Administration. Though the first credit union opened in the United States in 1909, and there were nearly 10,000 credit unions in the U.S. by 1960, Congress did not create the National Credit Union Administration until 1970.

Like the FDIC, the purpose of the NCUA is to insure deposits made by credit union members and protect those members who own credit unions. (Credit unions are not-for-profit and are owned by the members.)

Also like the FDIC, the NCUA states that it is “backed by the full faith and credit of the United States government” and insures deposits up to $250,000 per share owner, per insured credit union, for each account ownership category, share accounts (checking or savings accounts), and some IRAs and trusts.

Matching the FDIC’s track record, the NCUA states that no member has ever lost a cent from accounts insured through the NCUA.

All federally chartered credit unions are a part of the NCUA while state-chartered credit unions adhere to state-specific regulations. That said, many state-chartered credit unions are also insured by the NCUA.

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FDIC vs NCUA Insurance: Similarities and Differences

So what’s the difference between the FDIC and NCUA? The biggest difference regarding FDIC vs. NCUA is the customers they protect. The FDIC insures deposits for bank customers while the NCUA insures deposits for credit union members. As a customer of a financial institution, you will not likely notice a difference in your day-to-day banking.

In fact, it may be easier to talk about all the ways the FDIC and NCUA are similar. The table below explores these similarities (and minor differences).

What Does NCUA Coverage Protect?

NCUA coverage comes from the National Credit Union Share Insurance Fund (NCUSIF). The following account types are typically insured via the NCUSIF:

•   Share draft accounts (checking accounts)

•   Share savings accounts

•   Money market deposit accounts

•   Share certificates (like certificates of deposit)

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What Isn’t Covered by NCUA?

If your credit union carries insurance through the NCUA, you can usually depend on coverage up to $250,000 for common accounts like a checking or savings account. However, NCUA insurance does not cover securities and other non-deposit products, such as:

•   Stocks

•   Bonds

•   Mutual funds

•   Treasury securities

•   Annuities

•   Life insurance

•   Safe deposit boxes (or their contents)

What Does FDIC Coverage Protect?

Insurance through the FDIC typically covers account types that are comparable to those covered by the NCUA, but it’s for those held at most traditional or online banks vs. credit unions:

•   Checking accounts

•   Savings accounts

•   Money market deposit accounts

•   Time deposits (like certificates of deposit)

The FDIC also notes that its insurance covers Negotiable Order of Withdrawal (NOW) accounts, cashier’s checks, money orders, and other local items issued by a bank.

What Isn’t Covered by FDIC?

The FDIC has coverage exclusions similar to those of the NCUA. Its insurance through the FDIC does not extend to securities and other non-deposit products, such as:

•   Stocks

•   Bonds

•   Mutual funds

•   Annuities

•   Treasury securities

•   Life insurance

•   Safe deposit boxes (or their contents)

While the FDIC does not insure U.S. Treasury securities like bills, bonds, and notes, those assets are still “backed by the full faith and credit of the U.S. government.” As investments, Treasurys are subject to the risk of loss. However, the U.S. government guarantees the return of principal and interest when they’re held to maturity, making them one of the safest investments available.

How to Know if Your Institution Is Insured by the FDIC or NCUA

Because the FDIC and NCUA typically insure deposits up to $250,000 for checking, savings, and some other accounts (some external programs allow for higher insurance limits with the FDIC), it can be important to know when selecting a new financial institution that it is insured by one of the two organizations.

So how do you know if a bank is insured by the FDIC? The FDIC provides a few options:

•   Call and ask. Calling the FDIC is toll-free. You can reach them at 1-877-275-3342.

•   Search online. The FDIC has a database called BankFind that allows you to search for insured banks.

•   Look for the sign. When you enter a brick-and-mortar (aka physical) bank location, look for official FDIC signage.

•   Search the bank’s website. You can also simply review a bank’s website instead. Usually you can find language like “Member FDIC” in the footer if the bank is insured.

The options for determining whether a credit union is insured by the NCUA are similar:

•   Check online. Visit the NCUA’s agency website to search a complete directory of federally insured credit unions.

•   Look for the sign. Similar to the FDIC, the NCUA requires federally insured credit unions to place NCUSIF signage in their advertisements, offices, and branches to indicate insurance coverage.

•   Search the credit union’s website. Credit unions that are federally insured will include NCUA verbiage in the footer of their websites, just like banks do for the FDIC.

Remember, some state credit unions may not be federally insured. A credit union that includes “federal” in its name should automatically be insured by the NCUA. If you aren’t sure about a state credit union’s insurance, you can ask a credit union representative on site or over the phone for more information.

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Are All Banks FDIC Insured?

Most banks are FDIC insured — but not all of them. Any bank that is not insured federally through the FDIC likely carries insurance through its state, so your deposits are typically still safe. However, it is a good idea to thoroughly research a bank and its insurance policies before storing any money in an account at the institution.

Are All Credit Unions NCUA Insured?

Not all credit unions are NCUA insured. All federal credit unions should be automatically insured by the NCUA, but state credit unions must opt into NCUA share insurance. Those that don’t are typically insured through the state. As with banks, it is a good practice to check a credit union’s insurance status and understand how it can affect your money before opening any account.

How to Maximize FDIC and NCUA Insurance

Both the FDIC and NCUA are typically very clear on how much they insure — usually up to $250,000 — careful to use specific terminology like “per depositor” or “per share owner”; “per insured bank” and “per insured credit union”; and “for each account ownership category.”

Knowing that, there are a few ways you can maximize your insurance coverage:

Find a Program That Insures for More Than $250,000

As briefly noted above, some banks offer programs that allow depositors to insure their account for more than the usual $250,000 amount, typically by dividing assets into $250,000 chunks or less and holding those at different banks within a participating network. Check with financial institutions to see what may be available that can extend your account insurance to cover millions.

Open Accounts at Multiple Financial Institutions

You typically receive $250,000 of insurance coverage, per account ownership category, at each insured institution with applicable accounts. That means you could open up accounts at multiple banks and credit unions, spread your wealth across those accounts, and wind up with coverage on more than $250,000.

Use Account Ownership Categories to Your Advantage

Another way to maximize FDIC and NCUA insurance may be to utilize multiple account ownership categories. For example, at one bank, you could have a single ownership certificate of deposit with $200,000 and share a joint savings account holding another $200,000 with a partner. Even though you’d be above the $250,000 threshold, these separate account ownership categories can each qualify for the max insurance coverage.

Open Accounts for Various Family Members

You, your spouse, and your children could each open a single ownership savings account at the same bank and each deposit $250,000 in your own account. Because each account has a different depositor, each can be protected fully for $250,000.

Consider a Revocable Trust

If you and a partner want to put money together and save it as a potential nest egg for a family member, you can create a revocable trust (a type of trust fund). Then you can name beneficiaries for that money should you and the other account owner die. For each beneficiary, the account can be insured for $250,000. If you name three beneficiaries, you can deposit $750,000, and it will all be insured.

The Takeaway

The FDIC (Federal Deposit Insurance Corporation) and NCUA (National Credit Union Administration) are government agencies that protect consumers’ deposits at banks and credit unions. The two agencies operate similarly and protect the same kinds of accounts, typically up to $250,000 per account holder, per account ownership category, per insured institution. The key difference? The FDIC only insures money at banks while the NCUA only insures credit unions. Most but not all financial institutions have one of these types of insurance.

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FAQ

What does the NCUA not cover?

The National Credit Union Share Insurance Fund, which operates under the NCUA, does not cover stocks, bonds, mutual funds, annuities, life insurance policies, or safe deposit boxes and their contents.

How are the FDIC and NCUA similar?

Both the FDIC and NCUA are government agencies created by Congress to insure consumers’ deposits, including savings accounts, checking accounts, and CDs, up to $250,000 per person, per financial institution, and for each account ownership category. The main difference between FDIC and NCUA is that the FDIC insures banks and the NCUA insures credit unions.

Why are credit unions not FDIC-insured?

Credit unions are not FDIC-insured because the FDIC insures banks. Federal credit unions (and many state credit unions) are instead insured by the NCUA.

How much of your money is protected by FDIC or NCUA?

The FDIC insures up to $250,000 per depositor, per insured bank, for each category of ownership. In theory, you could have more than $250,000 across different account types at different FDIC-insured banks, and it would all be insured by the FDIC.

The same is true of the NCUA. The NCUA insures up to $250,000 per share owner, per insured credit union, for each category of ownership.

Photo credit: iStock/Talaj

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