Credit union deposit insurance: how does it work?
Bank account deposits are insured by the Federal Deposit Insurance Corporation (FDIC) and credit union deposits are protected with NCUA insurance. This is known as credit union deposit insurance. Consumers who use banks and credit unions are insured up to $250,000 per account.
Deposits at all federal credit unions and most state-chartered credit unions are covered by National Credit Union Share Insurance Fund (NCUSIF) protection. According to the National Credit Union Administration, not one penny of insured savings has ever been lost by a member of a federally insured credit union.
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Read on to learn more about credit union deposit insurance.
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What is the NCUA?
The National Credit Union Administration (NCUA) is an independent agency created by the U.S. government to regulate and supervise federal credit unions. The
NCUA also operates and manages the National Credit Union Share Insurance Fund (NCUSIF)
What's covered under the NCUA?
The NCU provides insurance for the following types of credit union accounts:
Regular share accounts. Credit unions use the term share account to define regular savings accounts.
Share draft accounts. Credit unions use the term share draft to define checking accounts.
Money market accounts. A
money market account, also referred to as a money market deposit account, is a type of savings account and is insured by the NCUA.
Share certificates.
Share certificates and CDs are both savings accounts and are essentially the same. The main difference is that share certificates are offered by credit unions and CDs are offered by banks
How much are credit unions insured for?
The NCUSIF provides all Members of federally insured credit unions with deposit insurance for credit unions up to $250,000 for their single ownership accounts. These accounts include regular shares, share drafts (similar to checking), money market accounts, and share certificates. Individuals with account balances totaling $250,000 or less at the same insured credit union are fully insured.
If a person has more than $250,000 at any single credit union, several options are available for additional share insurance coverage because the NCUSIF provides separate insurance for other accounts.
Are credit unions insured by the federal government?
Many, but not all, state-chartered credit unions are insured by the NCUA and provide credit union deposit insurance. According to the NCUA, credit unions need a charter from either the National Credit Union Administration or a state credit union regulator. The federal government and state governments have different chartering rules and requirements.
How do you know if a credit union is NCUA insured?
Federally insured credit unions are required to indicate their credit union deposit insurance status in their advertising and to display the official NCUSIF insurance sign in their offices and branches.
NCUA vs. FDIC: what's the difference?
The NCUA is the federal insurer of credit unions. NCUA insurance covers credit union Members if their credit union fails and cannot return their deposits that are held in checking, savings, share certificates, and money market accounts. NCUA deposit insurance for credit unions provides coverage up to $250,000 per individual depositor per credit union.
The Federal Deposit Insurance Corporation (FDIC) insures banks. The FDIC is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system. The FDIC insures deposits, and examines and supervises financial institutions for safety, soundness, and consumer protection, in addition to other responsibilities.
Are credit unions safer than banks?
Credit unions are just as safe as banks. Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.
Does the NCUA/NCUSIF provide additional coverage?
According to the NCUA, the NCUSIF provides additional coverage beyond the standard $250,000 that is separate from and in addition to the coverage available to their single ownership accounts. This applies to the following types of accounts:
Retirement accounts. The NCUSIF insures traditional and Roth IRAs for $250,000 in the aggregate at each credit union.
Joint accounts. Accounts owned by two or more people, and includes regular share accounts, share draft accounts, money market accounts, and share certificates. The NCUSIF provides each joint account holder with $250,000 coverage for their aggregate interests at each federally insured credit union.
Trust accounts. The NCUSIF provides separate coverage for both revocable and irrevocable trusts.
Revocable trusts. Revocable trust accounts may qualify for insurance coverage of up to $250,000 per beneficiary named by the owner (if a member of the credit union) that is separate from the individual coverage available to the trust owner (also referred to as grantor or settlor).
Irrevocable trusts. Irrevocable trusts have separate coverage based on the beneficial interest. The interest of each beneficiary in an account (or accounts) established as an irrevocable trust has separate NCUSIF coverage of up to $250,000. In cases where a beneficiary has an interest in more than one trust arrangement created by the same owner, the interests of the beneficiary in all accounts established under such trusts are added together for insurance purposes and insured for a total of up to $250,000.
How to insure excess deposits
Open a joint account. Joint accounts are those that are owned by two or more people who have equal rights to withdraw money from the account and have not named beneficiaries on the account. As mentioned above, the NCUSIF provides each joint account holder with $250,000 coverage for their aggregate interests at each federally insured credit union.
Open multiple accounts at different credit unions or banks. Each account held alone or jointly at a bank or credit union is insured up to $250,000. Opening accounts at several financial institutions means that each of these accounts will also be insured up to $250,000.
Consider brokerage accounts. Investment deposits in a brokerage account are insured by the Securities Investor Protection Corporation (SIPC), which protects consumers if a brokerage firm fails. The limit of SIPC protection is $500,000, which includes a $250,000 limit for cash. Other rules apply as well, so be sure you fully understand the conditions related to the SIPC and the type of account you open.
Why savvy consumers choose CU SoCal
For over 60 years CU SoCal has been providing financial services, including mortgages, Home Equity Loans, HELOCs, car loans, personal loans, credit cards, and other banking products, to those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County.
Please give us a call today at 866.287.6225 today to schedule a no-obligation loan consultation with a CU SoCal Member Services specialist.
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