Credit union share accounts are insured by the National Credit Union Share Insurance Fund (NCUSIF), administered by the National Credit Union Administration (NCUA). This fund, separate from the FDIC, is supported by credit unions, not taxpayer dollars. The fund has never had a negative balance and remains extremely healthy with the legal limit being held in reserves.

Not only can the NCUSIF be tapped to pay for credit union failures, but the fund is replenished by credit unions if large losses occur. NCUSIF's structure of prepaid premiums by credit unions "aligns the incentive of (government) bureaucrats, politicians and credit unions to minimize NCUSIF loss exposure better than the pay-as-you-go systems used by the other two federal funds," wrote Boston College Finance Professor Edward Kane.

The National Credit Union Share Insurance Fund (NCUSIF) is the federal fund created by Congress to insure member's deposits in credit unions up to the $100,000 federal limit. Administered by the National Credit Union Administration, the NCUSIF is backed by the "full faith and credit" of the U.S. Government. The NCUSIF maintains at or near 1.30 percent of federally insured credit union deposits. By law, federally insured credit unions maintain 1 percent of their deposits in the NCUSIF. Credit unions voluntarily capitalized the Fund in 1985 by depositing 1 percent of their deposits into the Fund. No federal tax dollars have ever been placed in the credit union financial Fund, and no member has ever lost money insured by the NCUSIF.

Credit unions as financial cooperatives invest their money primarily in small consumer loans to their members. They are prohibited by law from investing in leveraged buyouts, loans to Third World countries or speculative land deals.

National Credit Union Share Insurance Fund (NCUSIF)
In 1970 Congress created the National Credit Union Share Insurance Fund (NCUSIF), to insure member's deposits in credit unions up to the $100,000 federal limit, just like the FDIC does for banks. NCUSIF, administered by the National Credit Union Administration, is capitalized by credit unions and backed by the U.S. Government. Since October 1996, the fund's equity ratio has been maintained at or near 1.30 percent of federally insured credit union deposits, exceeding the federal limit of 1.00. This means that there is $1.30 on reserve for every $100 on deposit. Here are some facts about the National Credit Union Share Insurance Fund (NCUSIF).

The NCUSIF is the only insurance fund that operates on a pay-as-you-go system which prevents the accumulation of annual losses. The NCUSIF has its financial statements audited annually by the GAO and an independent auditing firm.

In 1985 under a bold recapitalization plan, credit unions transferred one percent of their insured deposits to the fund. Credit unions have a direct financial stake in the loss performance of their insurance fund. Credit unions give up earnings on their one percent deposits, and annually increase insurance deposits as assets and earnings grow. The fund is supported only by credit union contributions and not by tax-payer dollars. The NCUSIF has never had a negative balance.

How the credit union difference improves safety and soundness:
As cooperatives, credit unions are democratically controlled by the members.

• Every member is a shareholder with a vote in the operation of the credit union.
• Operating costs are lower in part because board members are trained volunteers.
• Not-for-profit credit unions tend to be conservatively run because members manage their own money.
• Personal loans predominate. Car loans and small personal loans account for more than half of credit union lending. As a result, the average loan delinquency for credit unions in the United States is around one percent of total loans.