How do credit unions protect your money? That’s an important question to ask because you should never trust a financial institution that doesn’t have safeguards in place to protect your money and minimize your risk.
Credit union members trust their financial institutions with their money and financial goals, and credit unions should do everything in their power to protect that money and provide members with the tools and guidance they need to fuel their dreams. Here’s what you need to know about credit union safety and how credit unions and the NCUA protect your money.
Is a Credit Union FDIC Insured?
When you look at a bank’s website, you’re almost certain to find a statement that accounts at the bank are insured by the Federal Deposit Insurance Corporation, or FDIC. The FDIC provides insurance for each account holder up to a maximum of $250,000. That means if the bank were to fail, the FDIC would make sure that your money was protected.
Like the FDIC, credit unions are regulated by the NCUA and insured through the National Credit Union Share Insurance Fund, or NCUSIF.
What Are the Differences Between FDIC and NCUSIF?
You might be wondering what the key differences between the FDIC and NCUSIF are. In many ways, they operate in the same way and provide the same service.
The FDIC was founded in 1933, not long after the start of the Great Depression. At the beginning of the Depression, many banks failed and depositors lost their money. The FDIC was instituted to provide financial stability and protection for Americans. It began providing insurance in 1934, and since its inception, no depositor has lost insured funds due to a bank failure.
The NCUSIF was first funded without the use of government-provided money. It provides a minimum of $250,000 in total coverage to every member of federally insured credit unions. Specifically, it provides the following:
- Insurance for individual accounts up to $250,000
- Protection for each member’s interest in all joint accounts up to $250,000
- Separate protection for IRA and KEOGH retirement accounts up to $250,000
The NCUSIF is backed by the full-faith and credit of the United States. Since its inception, no member at any federally insured credit union has lost a penny of their money.
Said another way, both the FDIC and the NCUSIF protect depositors’ money by insuring it in the event a bank or credit union fails.
What is the National Credit Union Association?
The National Credit Union Association, or NCUA, was founded by an act of Congress in 1970. Its mission is stated as follows:
“Protecting the system of cooperative credit and its member-owners through effective chartering, supervision, regulation, and insurance.”
The NCUA operates as an independent government agency led by a three-member Board of Directors that articulates policies, adopts rules for member credit unions, and approves budgets. The board members are appointed by the President of the United States and must be approved by the U.S. Senate.
In the same year as it was founded, the NCUA instituted the NCUSIF to protect members’ deposits and savings.
Are All Credit Union Deposits Protected by the NCUSIF?
Credit unions may be either federally chartered or state-chartered. All federally chartered credit unions are insured by the NCUSIF and the same is true of many—but not all—state-chartered credit unions.
Leaders Credit Union is a not-for-profit, NCUA-insured credit union. That means that if you are a member, your deposits and retirement accounts with us will be protected by the NCUSIF and backed by the federal government. As a federally insured credit union, all our member-owners have the peace of mind of knowing that they won’t risk losing any money with us.
How Else Do Credit Unions Protect Your Money?
You might still be wondering whether there are other ways, beyond being federally insured, that credit unions can protect your money. The short answer is yes.
Let’s start with fees. Banks are for-profit organizations that exist to make a profit, which means that they charge fees that help them pursue that goal and maximize their profits. Because credit union members are also owners, credit union fees tend to be significantly lower than bank fees. In many cases, you can get a credit union checking or savings account or a credit card with no fees attached. In every category, credit unions typically charge lower interest rates than banks on everything from credit cards to mortgages.
On a related note, credit unions also protect members’ money by helping it grow. Instead of the low interest rates typically paid by banks on deposits, credit unions pay members dividends. The dividend rates are typically higher than what you would find at a bank, and in some cases, they are significantly higher.
In other words, putting your money in a credit union account offers the same insurance protection you’d get with a bank, plus lower fees and interest rates to save you money and generous dividends to help your money grow.
What Are the Financial Advantages of Choosing a Federally Insured Credit Union?
Beyond the protection that a federally insured credit union provides for you and your money, there are other advantages to choosing a credit union over a bank. Here are some things to consider.
You’ll Be a Member, Not a Customer
Credit union members are all owners of the credit union, which means that you won’t be taken for granted. As a member, you’ll reap benefits that include typically lower rates and fees, generous dividends, and access to a dedicated staff who will prioritize your financial needs and goals.
You’ll Get Personalized Financial Guidance and Advice
While it’s certainly possible to get some financial advice if you have an account at a bank, you’re far more likely to get personalized guidance and advice tailored to your needs if you join a credit union instead.
Credit unions prioritize the financial health of their members. At Leaders Credit Union, we offer a broad array of financial wellness tools for our members in West Tennessee. These include the following:
- Financial Wellness Counseling. Our members have access to one-on-one financial wellness counseling to help them get out of debt, create a budget, and reach their short-term and long-term financial goals.
- Freedom Path. We’ve created a free financial education program that consists of short videos and action plans. Members can access Freedom Path on their computers, tablets, or phones, and all resources are available in both English and Spanish.
- Money Management Tool. Our free money management tool can help members forecast debt repayment, auto-generate budgets, track their spending, and more.
- GreenPath. GreenPath is another free tool that we provide. It’s designed to help members who may have struggled with money management to create budgets, pay down debt, and improve their credit in order to pursue their financial dreams.
- iGrad. iGrad is a tool designed for college students and college graduates. With it, they can track and repay student loans, monitor job opportunities, and create budgets for a financially healthy future.
Credit unions take an active interest in their members’ finances by making it easy for them to manage their money efficiently, control their spending, and work toward long-term financial goals such as buying a home, paying for college, or saving for a comfortable retirement.
You’ll Be Supporting Your Community
Another big difference between credit unions and banks is that credit unions consider community participation and support to be a crucial part of what they do. They don’t just have a branch in your community, they’re an active part of the community with all that community membership entails.
Credit unions support local charitable organizations and participate in community events. They may partner with local employers to provide necessary services for their employees, including adding employees to the list of residents eligible for membership.
Leaders Credit Union values the West Tennessee communities we serve and gives back to them:
- We accept nominations and recognize Community Champions in partnership with WBBJ-TV.
- Our Financial Champions volunteer their time to advocate for our employer partners and communities, work with local charities and civic organizations, and teach financial literacy classes to help community members pursue their financial dreams.
- We partner with the Leaders Education Foundation to give annual scholarships of up to $25,000 and provide funding for educational initiatives through the L.E.A.D.S Educational Grant Program.
We understand that by supporting the communities and residents of West Tennessee, we are also protecting their money because, as the saying goes, a rising tide lifts all boats.
Become a Leaders Credit Union Member Today
When you join a federally insured credit union, you’ll have the peace of mind of knowing that your money is insured by the NCUSIF and that you won’t risk losing your deposits in the unlikely event of a credit union failure. You’ll also be supporting your community and get access to financial tools and guidance to help you achieve your most important financial goals.
Do you live in West Tennessee? If so, you probably qualify to join Leaders Credit Union. Learn about our membership requirements and follow the steps in our guide to switching your primary checking account to make the transition with ease.