Difference Between FDIC and NCUA

The Federal Deposit Insurance Corporation, generally known as FDIC, is a federal deposit insurance plan. The NCUA is also a federal deposit insurance organization similar to FDIC.

FDIC is the insurer or the regulator of banks, in the very same way NCUA is the insurer of credit unions.

All the banks are not FDIC – insured, and all the credit unions are also not NCUA insured. Both FDIC and NCUA are guaranteed by the federal government.

FDIC vs NCUA

The main difference between FDIC and NCUA is that FDIC is the insurer for banks, whereas NCUA is the insurer of credit unions. FDIC is a government agency established in 1933 to protect all deposits accounts at banks. On the other hand, NCUA was established in 1970 to protect accounts at federal credit unions. There are more than 4000 banks that are insured by FDIC, and nearly 6000 credit unions are NCUA insured.

FDIC vs NCUA

FDIC maintains a reserve of cash to pay off depositors in case of bank failure. It is generally an insurance program funded by all the banks that are insured by FDIC. Furthermore, FDIC also plays a role as a bank regulator.

It was founded in 1933, and thousands of banks are FDIC insured.

National Credit Union Administration (NCUA) is a deposit insurance program that regulates credit unions. It’s also in the hand of the NCUSIF, which utilizes tax dollars for ensuring savings. NCUA was founded in 1970.

It’s a three-member board agency headquartered in Alexandria. In case of the failure of a credit union, the NCUA pays the deposit of insurance to the depositor.

Comparison Table Between FDIC and NCUA

Parameters of Comparison  FDIC  NCUA  
Stands for  Federal Deposit Insurance Corporation.  National  Credit Union Administration.  
What is itFDIC is a financial agency regulated by the government which insures customer deposits in banks.  NCUA is a nonprofit institution established to protect accounts at federal credit unions.  
Insurance  The insurer of banks.  The insurer of credit unions.  
Purpose  The purpose of FDIC is to maintain the confidence of the public in the financial system of a nation.  The purpose of NCUA is to regulate federal credit unions and to protect the funds of their members.  
Establishment  FDIC was established in 1933.  NCUA was established in 1970.  
Profit  It’s a for-profit financial organization, does not share its profit.  It’s a not-for-profit financial institution.  

What is FDIC?

The Federal Deposit Insurance Corporation (FDIC) is a government department that insures bank deposits. It was founded in 1933 to maintain financial stability in public. If any FDIC-insured institution fails, then the FDIC steps in to protect the funds.

It maintains a reserve of cash to pay off depositors in case of bank failure. It also plays a role as a bank regulator. It was established during the years of the Great Depression when many American banks were collapsed.

FDIC is not a bank. It is a government-owned insurance system for banks. Generally, FDIC insures bank deposits. If your bank is FDIC insured, it should indicate somewhere on its website.

FDIC insurance covers all types of deposits received at an insured bank, such as deposits in a checking account, savings account, money market account, and also financial items including money order, cashier’s check, etc.

Money invested in bonds, mutual funds, equities, and life insurance policies is not covered by the FDIC.

The FDIC provides Bank Deposit Insurance to nearly all customers of Retail Banking in the USA. The FDIC offered deposit insurance at 5,256 institutions in September 2019. There are also some distance ownership categories applied for FDIC.

Account categories comprise joint accounts, single accounts, retirement accounts, revocable trust accounts, employee accounts, government accounts, and so on.

What is NCUA?

Credit union funds are supervised by the National Credit Union Administration or NCUA. It protects the funds in savings, checking, and money market account. Credit unions are similar to banks in many ways, and it’s not-for-profit financial institution.

The NCUA or the National Credit Union Administration, established in 1970, allows the customer to maintain savings and checking accounts.

It has a three-member board of directors who serve six-year of service after being appointed by the President.

It is important to note that all the credit unions under NCUA are generally insured by the NCUA. Money market accounts share certificates, revocable trust accounts, irrevocable trust accounts, savings accounts are protected by federal share insurance.

The NCUSIF protects federal credit union accounts, and it insures about 98% of all credit unions in the US. It is backed by the government.

Additionally, Federal share insurance is important for protecting money in our accounts, and the NCUA frequently reviews how federal credit unions are working.

If a credit union fails, the NCUA will transfer your money to another federally insured credit union.

Main Differences Between FDIC and NCUA

  1. Only credit institutions are handled through the FDIC and make use of the deposit insurance fund. NCUA, on the other hand, makes use of the National Credit Union Share Insurance Fund.
  2. FDIC stands for Federal Deposit Insurance Corporation. On the other hand, NCUA stands for National Credit Union Administration.
  3. Federal Deposit Insurance Corporation was established in 1933, on July 16. On the other hand, National Credit Union Administration was established in 1970.
  4. The FDIC regulates and insures bank deposits. On the other hand, the NCUA insures credit union deposits.
  5. NCUA credit unions are not-for-profit financial institutions that are managed by their members. On the other hand, FDIC is a for-profit institution and does not share its profit amount with the depositors.

Conclusion

Credit unions and banks are essential to maintaining the financial system of a nation. Generally, banks are a for-profit institution that offers a wide range of financial services. They make their profits by their high-interest system and fees.

Both the structure of FDIC and NCUA is identical. FDIC is applicable for bank insurance, and NCUA applies to the insurance of credit unions.

Practically most of the banks offer FDIC coverage. They both offer similar financial services such as auto loans, mortgages, and savings accounts. Both the FDIC and NCUA insure joint accounts separately from single-owner accounts.

Moreover, credit unions offer more personalized financial services in comparison to traditional banking services.

References

  1. https://link.springer.com/chapter/10.1007/978-94-009-3277-7_10
  2. https://heinonline.org/hol-cgi-bin/get_pdf.cgi?handle=hein.journals/fsubr14&section=6
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