The money that customers deposit in credit union accounts is protected by the National Credit Union Administration (NCUA), a government organization that regulates credit unions. In that regard, it serves a function somewhat similar to that of the organization that guarantees bank deposits, the Federal Deposit Insurance Corporation (FDIC).
The NCUA offers insurance up to $250,000 per person, per bank, and per ownership category, similar to the FDIC. Who owns the account is indicated by the term ownership category. The National Credit Union Administration defines itself as 98% of credit unions in the US are governed and insured by the NCUA.
That covers all credit unions with federal charters as well as the great majority of those with state charters. The NCUA was established by Congress in 1970 to oversee federal credit unions. The agency is governed by a board of three people.
Members of the board are chosen by the president and given Senate approval before beginning staggered six-year terms. Yet, the NCUA receives no funding from the government and is exclusively supported by the premiums paid by the credit unions it oversees and insures.
Look for the NCUA logo on credit union publications or use the NCUA’s search tool to determine whether the NCUA insures your credit union.
For federally chartered credit unions, the NCUA offers a variety of services, including: Deposits made at the credit union are covered; credit union charters, which are permits to operate; observing credit unions to make sure they adhere to applicable laws and ethical standards; and the National Credit Union Share Insurance Fund, financed by participating credit unions, is likewise under the NCUA’s management. In the event that a credit union fails, money from this reserve is used to return members’ deposits.
Each credit union account is insured by the NCUA up to a total of $250,000 per individual. The following account types are covered by NCUA insurance: escrow accounts; checking accounts for drafts to be shared; CDs; accounts for money markets; accounts for individual retirement
Typically, the $250,000 insurance limit applies to all accounts at the same credit union that belong to the same ownership type. Assume you have a $10,000 balance in each of your personal accounts—a $10,000 balance in your money market account and a $10,000 balance in your savings account.
Since the combined value of the two is less than $250,000, all of your money would be guaranteed in that scenario. Any funds in excess of $250,000 would not be covered and would most likely be lost in the event of a credit union failure. By distributing your funds around different credit unions and ownership classes, you can insure deposits worth more than $250,000.