Are Credit Unions Safer Than Banks?
Just like banks, credit unions are federally insured; however, credit unions are not insured by the Federal Deposit Insurance Corporation (FDIC). Instead, the National Credit Union Administration (NCUA) is the federal insurer of credit unions, making them just as safe as traditional banks.
With a keen focus on financial stability, Credit Union of Southern California (CU SoCal) provides a range of personal banking services at competitive rates to anyone who lives, works, worships, or attends school in Orange County, Los Angeles County, San Bernardino County, and Riverside County.
What’s more, we’ve garnered an impressive customer satisfaction rating of over 87%, and 80% of our members would gladly recommend our banking services to friends and family.
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In this article, we will further answer the question of “Are credit unions federally insured”, and compare their products and services to traditional banks.
What Is The NCUA?
The National Credit Union Administration (NCUA) is an independent agency created by the U.S. government to regulate and protect credit unions and their owners.
Just like the FDIC, the NCUA insures up to $250,000 to all credit union members and provides protection in the event of a credit union failure.
Moreover, NCUA is presided over by a three-member board, appointed by the President and confirmed by the Senate. The selected members belong to different political parties, and each member serves for a term of six years.
After the creation of NCUA, the government also established the National Credit Union Insurance Fund (NCUSIF) that’s responsible for ensuring credit unions. NCUSIF is assigned to provide insurance of up to $250,000 per account to credit unions that are on the verge of failure.
Now that you know how much credit unions are insured for, it’s also important to know that each credit union has to contribute at least 1% of their shares to the NCUSIF. Also, to gain NCUA’s membership, a credit union must get a state or federal charter.
NCUA vs. FDIC: What’s The Difference?
Both the NCUA and FDIC are independent federally owned agencies responsible for taking measures to keep financial institutions afloat.
People usually ask, “are credit unions FDIC insured”, but now we know that FDIC insures banks only, and the agency responsible for credit unions is the NCUA—so when it comes to NUAC vs. FDIC, the difference boils down to the institutions they cover.
Below is some additional information regarding the NCUA and FDIC.
What NCUA Coverage Protects?
The NCUA insures up to $250,000 to each member of the credit union. If you have more than one account in a credit union, your account’s total deposits are calculated and collectively insured up to $250,000.
NCUA provides coverage for individual accounts such as single-owned credit union accounts, joint accounts shared by more than two people as well as traditional IRA or KEOGH retirement accounts.
Moreover, it protects revocable trust accounts that have an owner and multiple beneficiaries and irrevocable trust accounts created due to a written trust agreement.
Also,
money market accounts that allow you to pay interest according to the money market’s current interest rates are covered by NCUA as well.
What isn’t covered by NCUA?
NCUA is tasked with insuring deposits only.
Some of the accounts that do not qualify for NCUA coverage include mutual funds used for collecting money from investing bodies to buy bonds. The list also includes stocks that provide ownership of an entity through an investment, life insurance policies, and annuities that are offered by affiliated bodies.
What FDIC coverage protects?
FDIC covers
checking accounts that allow you to write checks and
savings accounts that help you save money by earning interest.
Moreover, the FDIC insures money market accounts, which are high interest-earning accounts offering limited to no check-writing services and
deposit certificates with a fixed amount of interest and determined withdrawal date.
It also provides insurance for revocable trust accounts that are owned by one person but have one or more beneficiaries and irrevocable trust accounts created by a written agreement.
What isn’t covered by FDIC?
Some of the accounts that FDIC does not cover include stocks, bonds, annuities, mutual funds, life insurance policies, safe deposit boxes, U.S. treasury bills, and municipal investments.
Moreover, only your account balance and compound interest on it will be insured, provided the balance remains under the limit. If not, the amount exceeding the limit might not be covered by FDIC and left vulnerable.
Hence, it is essential to check with the financial institutions of your choice about any limitations in their insurance criteria.
Is A Credit Union The Best Choice For Me?
Credit unions are not-for-profit organizations led by a team that solely strives for the financial stability of its members.
Credit unions offer more personalized financial services compared to traditional banking institutions, and even if you’re suddenly laid off from your job or pushed into a difficult situation, your credit union will be more than willing to help you stay afloat.
Credit unions also provide lower interest rates for loans and help you earn more money on your deposits. Not only can you save on lower interest rates, but you can also reap the benefits of lower service charges.
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For over 60 years, CU SoCal has helped over 121,000 members achieve their financial goals.
We offer low-interest loans, better savings, lower fees, and much more to ensure your financial stability for the long term. Not only this, but we also provide personalized guidance on our products, services, and tools that you might be interested in.
Our services include
credit card programs that help you earn reward points,
auto loans,
personal loans,
home equity loans, and lines of credit and
mortgage payments.
Now that you know how safe credit unions are and how much are these credit unions insured for – make us your financial partner and get in touch with us.
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