What is the NCUA, and how does it work?
The National Credit Union Administration (NCUA) is a federal agency that oversees credit unions and insures the money people deposit in credit union accounts. In that way, it plays a very similar role to the Federal Deposit Insurance Corporation (FDIC), the agency that insures bank deposits.
Like the FDIC, the NCUA insures up to $250,000 per person, per bank, and per ownership category. The term ownership category is a way of describing who owns the account.
What is the National Credit Union Administration?
The NCUA regulates and insures 98% of credit unions in the United States. That includes all of the federally-chartered credit unions and the vast majority of state-chartered credit unions as well.
Congress created the NCUA in 1970 to regulate federal credit unions. A three-member board oversees the agency. Board members are appointed by the president, approved by the Senate, and serve staggered six-year terms. The NCUA, however, isn’t funded by the government but entirely by premiums paid by the credit unions it insures and regulates.
To see if the NCUA insures your credit union, look for the NCUA logo on credit union materials or use the NCUA’s search tool.
What does the NCUA do?
The NCUA provides multiple services for federally chartered credit unions, including:
Insuring deposits made at the credit union
Providing licenses, called charters, for credit unions to operate
Monitoring credit unions to ensure they follow applicable laws and good practices
The NCUA is also responsible for managing the National Credit Union Share Insurance Fund, funded by participating credit unions. Money in this fund repays credit union members’ deposits if a credit union fails.
What does NCUA insurance cover?
The NCUA insures each credit union account up to $250,000 per person. The NCUA insures the following types of accounts:
Share draft (checking) accounts
Money market accounts
Individual retirement accounts
Along with the types of accounts that the NCUA insures, there are also different ownership categories:
Some retirement accounts
Revocable trust accounts
Irrevocable trust accounts
Employee benefit accounts
Generally, all accounts in the same ownership category at the same credit union count toward the $250,000 insurance limit. Let’s say you have an individual savings account with a $10,000 balance and an individual money market account with a $10,000 balance. In that case, all your money would be insured because the total between the two is less than $250,000. Any money above the $250,000 amount would not be insured and likely would be lost if the credit union failed.
You can insure more than $250,000 worth of deposits by spreading your money across credit unions and ownership categories. For example, money in a joint account is not combined with money from an individual account. Each joint account holder is also eligible for $250,000 in insurance. You can use the NCUA’s Share Insurance Estimator tool to determine if your money is insured.
Some accounts are not covered by the NCUA, including mutual funds, stocks, bonds, municipal securities, life insurance policies, and safety deposit boxes.
What happens when a credit union fails?
When a credit union fails and is closed, it enters liquidation, and the NCUA takes over its management. During liquidation, another credit union can buy the failed credit union, taking over its members, assets, and loans. In that case, your insured deposits would move to the new credit union. If a failed credit union isn’t bought, you would typically receive your deposit money within five days of the credit union closing.
If your money is held in an NCUA-insured credit union, it’s safe as long as you don’t have more than $250,000 in accounts that fall under the same ownership category. If you have more than $250,000 on deposit at a credit union, be sure to read up on NCUA insurance specifics and consider seeking guidance from an employee of the credit union.