When you deposit your money into a federally insured financial institution, you automatically receive a certain level of security in how your money is protected.

Banks are insured by the Federal Deposit Insurance Corporation (FDIC), while credit unions are insured by the National Credit Union Administration (NCUA). These federal agencies are responsible for backing consumer deposits in case an insured financial institution fails.

FDIC Insurance Explained

While most banks and credit unions are stable financial institutions, there have been times, both historically and in recent years, when bank failures have occurred.

It could be caused by economic turbulence causing too many individuals to withdraw their cash at once, causing a run on a bank. Or it could be from the bank taking on too many high-risk loans that go into default. Whatever the reason, FDIC insurance protects depositors by covering eligible accounts in the event there is a failure.

But it's important to realize that bank failures aren't common. In the last five years, there have only been no more than five closed banks per year.

What's Covered by FDIC Insurance

These are the primary types of accounts covered by FDIC insurance:

  • Checking and savings accounts
  • Money market deposit accounts
  • Certificates of deposits
  • Negotiable order of withdrawal (NOW) accounts
  • Cashier's checks and money orders

And here are the types of bank holdings that are not covered:

  • Stocks and bonds
  • Mutual funds
  • Annuities
  • Life insurance policies
  • Safe deposit boxes
  • U.S. Treasury bills, bonds, and notes
  • Municipal securities
  • Crypto assets

You can calculate your exact coverage on the FDIC website based on the types of accounts you have and the amounts at each bank. 

FDIC Insurance Limits

Despite the broad coverage available, there are some restrictions on FDIC-insured accounts. Deposits are only protected up to $250,000 per depositor and per ownership category at one FDIC-insured bank.

Ownership categories are broken down as follows:

  • Single accounts
  • Joint accounts
  • Some retirement accounts
  • Trust accounts
  • Employee benefit plan accounts
  • Corporation accounts
  • Government accounts

So if you have $250,000 in each category at the same bank, FDIC insurance could cover the full amount. Alternatively, if you have savings accounts up to $250,000 across multiple financial institutions, all of those funds are likely covered as well. But one account with a $500,000 balance would only be covered by the FDIC up to $250,000 for single account holders.

FDIC vs. NCUA: What's the Difference?

The FDIC and NCUA offer nearly identical federal insurance on deposits. The difference is the type of financial institution each one covers. The FDIC insures banks, while the NCUA covers credit unions. If you have funds at a credit union like ACU of Texas, you can use the NCUA share insurance estimator to determine how much coverage you have across your accounts.

Is Your Account Covered?

Check to see if your financial institution is FDIC- or NCUA-insured. Then look at the eligible accounts, which include deposit accounts. Non-deposit investments are not covered, even if your financial institution offers them.

Looking for a federally insured credit union in Texas? Join ACU of Texas today!