Q: The savings account rates at credit unions seem to be really good, but I’m worried they’re not as safe. Are credit unions FDIC insured like banks, or is my money at risk if the credit union goes under?
A: It’s great you’re thinking about important factors like federal insurance when choosing your next bank account. It’s true that credit unions operate differently than banks in a lot of ways, including how deposits are insured.
In short, the answer to your question is no — credit unions are not FDIC-insured. However, both banks and credit unions can be federally insured — the difference is the organization backing them. While bank deposits are FDIC insured, credit union deposits are insured through the National Credit Union Administration (NCUA).
Like the FDIC, the NCUA is an independent federal agency, backed by the government. It is responsible for chartering, supervising and insuring federal credit unions, and operates the National Credit Union Share Insurance Fund (NCUSIF).
The rules surrounding what is insured under the NCUA are pretty much the same as the FDIC: Individual deposit accounts are protected up to $250,000 per depositor. Additionally, that limit applies to the total deposits with one institution, but additional coverage is sometimes available through the NCUSIF.
Finally, not every credit union is federally insured. The NCUA backs all federally-chartered credit unions, but some state-chartered institutions are not covered. However, most credit unions will opt for NCUA insurance (only about five percent of credit unions are privately insured).
Photo: Matthew G. Bisanz