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NCUSIF Deposit Insurance: How Your Money in Credit Union is Protected

One of the many reasons that people keep their money in a bank account is that banks keep their money safe.

Even if the bank fails and cannot return your money to you, the Federal Deposit Insurance Corporation (FDIC) offers up to $250,000 in insurance.

That helps people feel confident about keeping their money at the bank.

Credit unions are a popular alternative to banks because of their community focus. However, they don’t receive insurance from the FDIC.

Instead:

Credit unions rely on the National Credit Union Administration (NCUA) and the National Credit Union Share Insurance Fund (NCUSIF) to protect their depositors in the event of a credit union failing.

What is the NCUA and the NCUSIF?

The NCUA is an independent federal agency that helps provide insurance to credit unions in the United States.

It is backed by the full faith and credit of the United States government, giving it similar creditworthiness to US government bonds.

The NCUA manages the NCUSIF which is a fund designed to protect depositors who put their money in accounts at credit unions.

As of September 2016, the NCUSIF insured 5,844 credit unions with total assets of $1.3 trillion.

The NCUSIF started in the 1970s and has offered insurance to credit unions since.

What is the NCUSIF Deposit Insurance Limit?

Like the FDIC, the NCUSIF offers insurance for up to $250,000 deposited at covered credit unions.

So:

If you have money at a credit union and that credit union is unable to return your deposits, the NCUSIF will reimburse you for your losses, up to a limit of $250,000.

This limit applies across all of the accounts that you have at the credit union, including your savings and checking accounts under the same ownership type.

Ownership types include:

  • Individual accounts
  • Joint accounts
  • Retirement
  • Trust accounts

That means:

You can have another $250,000 each insured in accounts with other ownership rules.

For example, a total of $500,000 in a personal checking account will only have $250,000 insured and the other $250,000 uninsured.

You can have $250,000 in a personal checking account and another $250,000 in a joint checking account at the same credit union and the entire $500,000 will be insured.

Exceeding the limit

If you have deposits over the $250,000 insurance limit, it isn’t an issue unless the credit unions fails or is otherwise unable to return your money to you.

If that happens, the NCUSIF will not insure the amount over the $250,000 limit, instead reimbursing you for up to $250,000, but no more than that. 

What Happens if a Credit Union Fails?

If a credit union experiences problems that could cause it to become unable to manage its member’s money properly, the NCUA may place the credit union into conservatorship.

When this happens, the NCUA takes over the management of the credit union to help rectify its problems and return to normal operation.

When a credit union goes into conservatorship, there are three possible outcomes:

  1. The credit union resolves its problems and returns to normal ownership and operations.
  2. The credit union merges with another, more stable credit union.
  3. The NCUA liquidates the credit union.

If the NCUA liquidates a credit union, the credit union closes, while a competitor may have the option to purchase the closing credit union.

If another organization purchases a liquidated credit union, it takes over its loans, assets, and accounts, so the closing credit unions members can begin banking with the credit union making the purchase.

If no competitor wants to purchase a failing credit union, the NCUA’s Asset Management and Assistance Center handles the liquidation process, managing remaining assets, settling insurance claims from the credit union’s members, and recovering any value it can from the credit union’s assets.

Typically, credit union members receive their funds from the NCUA within five days of their credit union’s closure.

Most important to note:

To date, no credit union member has lost any insured money due to a credit union failure.

NCUA vs. FDIC

The NCUA and the FDIC serve very similar purposes, so it can be easy to get confused between the two.

The important distinction between them is that the FDIC covers accounts at banks while the NCUA insured accounts at credit unions.

Both organizations act similarly but interact with different types of financial institutions. Their protections do not overlap.

How to Keep More than $250,000 Insured

If you’re fortunate enough to have more than $250,000 that you want to keep protected in a bank or credit union, there are a few strategies that you can use to do so.

Multiple account ownership types

One is to open both single ownership and joint ownership accounts at the credit union.

You can receive $250,000 in coverage for personal accounts, plus an additional $250,000 in coverage in a joint account.

If you have a spouse or partner, you can receive up to $750,000 in coverage from one credit union.

Each of you can open an individual account, receiving $250,000 in protection each, then open a joint account which gets an additional $250,000 in coverage.

Use more than one financial institution

Another strategy is to open accounts at multiple banks or credit unions.

FDIC and NCUA coverage apply based on the institution that holds your funds.

If you have an account at a credit union and open an account at a second credit union, both receive the full $250,000 in coverage.

If you have a lot of money to keep protected, you can keep opening accounts at different institutions to expand the amount of coverage you receive. Just make sure you keep no more than $250,000 at each credit union.

Interest earnings could break the covered limit

Finally, keep an eye on your balances, especially in interest-bearing accounts such as savings accounts or certificates of deposit (CDs).

If you’re close to the $250,000 insurance limit, the interest you earn can drive your total balances over the insurable limit, which means you could lose money if your credit union fails.