I was going over our server logs and noticed that someone had come looking for the answer to, “What is the difference between FDIC and NCUA Insured?”
Wow, I felt really silly because I didn’t actually have the answer posted. After all, it is an important question for folks depositing their funds into credit union and banks certificates of deposit.
And the answer is, there is really no difference as far as federal protection. Both protect your bank accounts (CDs, Savings, Checking, Money-Market) up to $250,000 through 12/31/13. If the government doesn’t extend the protection again, it will revert back to $100,000. Both protect your IRA accounts assuming they are in a bank account and not a securities account up to $250,000. That was a permanent change made in 2004. IRAs are insured separately then your regular bank accounts.
Both are federally guaranteed. The NCUA oversees and insures credit unions and the FDIC oversees and insures. But, the NCUA is currently in better shape. Not that I believe the FDIC won’t be able to pay its obligations, you just don’t here about the NCUA having to bail out too many credit unions.
The largest difference is credit unions overall, are in better shape then banks. We have dealt with countless bank closures the last two years. There has only been a handful of credit union closures. And the reason is the foundational difference between a credit union and a bank. At a credit union, everyone is a member and has one vote, no matter how big their deposits are. The credit union exists to give the lowest loan rates and best savings rates it can to its members. Credit Unions are non-profit organizations. Because of their non-profit (and tax exempt) status, their investment options are limited. Most of their investments are in boring things like CDs ( :O) ), government bonds, and treasuries. They are limited in who and what they can lend to. Both of these significantly lower the risk of having problems.
Now, I don’t want my banker friends to get mad at me. Usually, small community banks operate much like credit unions in that they put the people first. However, a bank is a for profit organization. Usually, a small group of investors has put their capital into the bank and they want a return on their money. The pressure for more returns leads banks to make riskier decisions. And over the last two years we’ve seen the result of that.
So when it comes down to it, there is no difference in your insurance protection between FDIC and NCUA insured accounts. If either a bank or credit union fails that is federally insured, you will get your money back. However, there may be differences between the
credit union CD Rates
Chris Duncan is a FINRA Registered Representative. He specializes in helping clients find the highest and best CD rates nationwide. His clients include individuals, financial institutions, corporations, and public agencies. Here is a resource for
6 month Jumbo CD Rates and a
history on CD Rates
