Are Credit Unions a Safe Place for Your Money?
NCUSIF vs. FDIC Insurance
When you use a bank or credit union, safety should be at the top of your priority list. One of the primary reasons to deposit funds is to keep it safe. Instead of walking around with a month’s worth of cash—risking loss to misplacement or theft—you can hold funds in a financial institution. As a bonus, you might even earn interest.
But some people are confused about credit unions, which are similar to banks but are technically not FDIC-insured. Still, your money is probably quite safe.
Are Credit Unions Safe?
Federally-insured credit unions are just as safe as FDIC-insured bank accounts. The National Credit Union Insurance Fund (NCUSIF), which is backed by the U.S. Treasury, insures your funds. The National Credit Union Administration (NCUA), an agency of the U.S. government, administers NCUSIF coverage.
That said, some credit unions are not federally-insured.
FDIC insurance: You’re probably familiar with FDIC insurance, which protects you from bank failures, and which provides the security that bank customers depend on. The U.S. Treasury backs FDIC insurance, and most consumers are probably more familiar with FDIC insurance than NCUSIF coverage.
Government guarantee: According to NCUA, “the NCUSIF is a federal insurance fund backed by the full faith and credit of the United States government.” In plain English, that means it’s government-guaranteed, just like FDIC insurance. If your federally-insured credit union fails and the entire pool of money in the NCUSIF is exhausted, the U.S. government promises to come up with any funds needed to replace your savings.
The federal government can raise funds in a variety of ways, including collecting taxes. If the U.S. government was unable or unwilling to reimburse you for whatever reason, you’d be out of luck whether you had an account at a bank or a credit union (and you’d have bigger problems to worry about).
The NCUA reports that “Not one penny of insured savings has ever been lost by a member of a federally insured credit union.”
How Much Is Insured?
FDIC and NCUSIF insurance both provide up to $250,000 of coverage “per depositor per institution.” If you have less than $250,000 at any institution, you’re covered—and you might even be below the limit if you have more than that, depending on how your accounts are titled. For example, if you have an IRA and a checking account at the same credit union, you might have more than $250,000 of coverage at that institution. To find out specifically where you stand, use the NCUA’s Share Insurance Estimator.
What Does Federally-Insured Mean?
Credit unions are safest when they are federally-insured credit unions. Most credit unions fall into that category, but it’s worth verifying what type of credit union you’re working with. If the credit union’s name includes the word “Federal” it’s easy—they’re explicitly claiming that NCUSIF protects your funds.
If your credit union’s name does not contain the word “Federal,” it can still be a federally-insured credit union. The best way to find out is to research credit unions through the NCUA.
Private insurance: Some credit unions are not federally-insured. These institutions are often very safe as well, but they don’t have the backing of the U.S. government. Your safety depends on how the credit union operates and any insurance (possibly private insurance) available. If you’re not sure how safe your credit union is, ask questions about share insurance and who stands behind it. Privately-insured credit unions aren’t necessarily bad—they just don’t offer the absolute highest level of safety available.
What Is (and Isn’t) Insured?
Credit unions are safe places for cash and cash-like holdings. NCUA insurance generally covers:
What’s not covered: If you use any other type of investment through your credit union, those holdings are probably not covered by the NCUSIF. Examples of assets that are not insured include, but are not limited to:
- Mutual funds, Stocks, and ETFs
- Annuities and other insurance products
- Items in your safety deposit box
- Other investment vehicles
More About Credit Unions
Credit unions are typically involved in the community, and they offer many of the services you need for basic money management. To learn more about how they work and what to expect, read about the basics of credit unions and how they compare to banks.