Credit union failure is rare. But if it does happen, and if your credit union is backed by the National Credit Union Administration, your deposits are protected. The NCUA is a federal agency created by Congress to regulate credit unions and insure your money. Like the Federal Deposit Insurance Corp., which insures bank deposits, the NCUA makes sure your credit union assets stay secure.
How NCUA insurance works
Here’s how similar the NCUA and the FDIC are — and how they keep your money safe:
|What it is||
An independent federal agency that insures consumers’ deposits.
|Where it applies|
|How much it insures||
$250,000 per person, per institution, per ownership category.
• Checking accounts.
|What's not insured||
• Mutual funds.
The government requires all federally chartered credit unions to carry NCUA insurance. State-chartered credit unions may purchase private insurance to cover deposits, but many opt for coverage through the NCUA. This premium doesn’t come out of your wallet; credit unions cover the cost.
The NCUA insures up to $250,000 per depositor, per institution, per ownership category. “Ownership category” refers to account type, usually single or joint. If you have a single and a joint account at the same institution, both are insured up to the $250,000 limit.
» MORE: NerdWallet’s best credit unions
How to get your money back if your credit union goes under
Before a credit union fails, the NCUA will try to sell its deposits and loans to another credit union. If the sale is successful, customers’ accounts are simply transferred.
If not, the NCUA will send customers a check for the insured balance of their deposits, usually within a few days of a credit union’s closing. The NCUA will notify customers via mail if it requires further action to redeem deposits.
The limits of NCUA insurance — and how to maximize it
Like FDIC insurance, NCUA coverage extends only to deposit accounts: checking, savings and money market accounts and certificates of deposit. Some retirement plans and employee benefit plans are also covered and count as separate ownership categories. Investment losses aren’t covered — even if you purchased the investments through an insured credit union — and neither are the contents of safe deposit boxes.
Deposits beyond $250,000 aren’t insured, even if they’re in an eligible account, but there’s a way around that: You can distribute your money across different institutions to get coverage. The following example shows how you can maximize your deposit insurance.
|Institution||Single accounts||Joint accounts||NCUA coverage (up to $250,000)|
|Credit union 1||$100,000 in CDs||$200,000 in checking and savings||$200,000 for the joint category
$100,000 for the single category
|Credit union 2||$25,000 in checking|
$75,000 in a money market account
|None||$100,000 for the single category|
Ownership categories, too, can affect how your money is insured. In the example above, you’re covered beyond $250,000 at credit union No. 1 because the single-owned CDs are considered one ownership category and the joint checking and savings accounts are considered another.
Choose the options that allow you to protect all of your money.
» MORE: How to choose a credit union
To find out whether your deposits are federally insured, search for your credit union on the NCUA’s credit union locator. If your deposits exceed $250,000, spread your money across multiple banks or credit unions to protect it as much as possible.
When it comes to your money’s safety, both credit unions and banks are solid so long as they’re insured. But there are important differences between credit unions and banks that you should consider if choosing between the two. If you decide on a credit union, here are some of our favorites.