FDIC vs. NCUA

Both the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) insure financial institutions with the backing of the government. But while the FDIC provides insurance for bank deposits, the NCUA insures credit union deposits. It begs the question: when comparing the FDIC vs. NCUA, is one safer than the other? This is what to know.

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What Is the FDIC?

The FDIC was established by the Banking Act in 1933 in an effort to restore public confidence in U.S. banks during the Great Depression. Now, almost a century later, its mission is still to “promote confidence and stability in the nation’s financial system.” And since its founding, the FDIC says that “no depositor has lost a penny of FDIC-insured funds.”

That is because the FDIC is a federal agency that insures deposits up to $250,000 for each depositor in member banks. This insurance covers several types of bank accounts:

Checking accounts
Savings accounts
Money market deposit accounts
Certificates of deposit (CDs)
Prepaid cards meeting FDIC requirements
Revocable and irrevocable trust accounts

Additionally, the deposit insurance also covers “retirement accounts in which plan participants have the right to direct how the money is invested.”

These include:

Individual retirement accounts (IRAs)
Self-directed defined contribution plans like 401(k)s or profit-sharing plans
Self-directed Keogh plan accounts
Section 457 deferred compensation plan accounts (both self-directed and not)

The FDIC does not cover investment products that are not deposits. These include:

What Is the NCUA?

The NCUA is another federal agency that was created in 1970. Its mission is to protect “the system of cooperative credit and its member-owners through effective chartering, supervision, regulation, and insurance.” Its coverage became permanent in 2010 through the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Like the FDIC’s deposit insurance fund, the NCUA’s insurance fund is backed by the U.S. government and covers “up to $250,000 of federal share insurance to millions of account holders in all federal credit unions and the overwhelming majority of state-chartered credit unions.”

Specifically, the insurance fund covers single ownership accounts that include “regular shares, share drafts (similar to checking), money market accounts, and share certificates.” It also covers traditional and Roth IRAs up to $250,000 in the aggregate at each credit union.

FDIC vs. NCUA: Key Differences

There are several key differences between the FDIC and the NCUA. The table below offers you a comparison.

	FDIC	NCUA
Type of Institution	Bank	Credit union
Institutional Ownership	Stockholders	Members
Provides Stability For	The banking system	Cooperative credit
Regulating Party for Institution	Federal Reserve	NCUA
Coverage	$250,000 per insured bank, per depositor, per account ownership category	$250,000 per insured credit union, per member-owner, per account ownership category

FDIC vs. NCUA: Which Insurance Is Better?

Both funds offer similar coverage, but your choice depends on which type of financial institution serves your needs better: a bank or a credit union.

When compared with credit unions, banks can offer you a wider selection of financial products, more ATMs and greater online access. However, you may also face higher fees, lower interest rates on deposit accounts and strict lending rules.

Credit unions, on the other hand, can offer members more personalized services with lower interest rates for credit cards and loans and higher interest on savings and deposit accounts. These financial institutions can also have lower fees and more lenient lending rules, but they are mostly regionally-based with fewer brick-and-mortar branches and limited online banking.

Bottom Line

Whether you put your money in a bank or a credit union, FDIC and NCUA funds will cover up to $250,000 per depositor in either financial institution. Your choice between one fund or the other will be based on which serves your financial needs best – do you prefer a bank or a credit union?

Banking Tips for Beginners

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