What You Need To Know About The FDIC And Your Money

What You Need To Know About The FDIC And Your Money


The Federal Deposit Insurance Corporation (FDIC) was created in 1933 to provide deposit insurance for America’s banking system. Reporting directly to the federal government, the FDIC was put into place as response to the Great Depression-era bank runs. During that time, a simple panic would spark a run on a bank, quickly draining the institution of all of its Liberty Head Dollardeposits and making it insolvent. Millions of people lost all or part of their money, necessitating the creation of the FDIC to guarantee deposits.

Over the past month, the FDIC has been in the news quite a bit as the number of bank failures has increased, including some high profile failures involving Washington Mutual and Wachovia. In most cases the FDIC and other federal agencies have been able to resolve the crisis quickly, but not every customer has escaped unscathed.

Are You Covered Or Not?

There are limitations to the amount of money that the FDIC will ensure, meaning some customers risk losing a portion of their monies if they aren’t aware of the FDIC’s limitations. To clarify matters, we’re sharing with you current guidelines to help you determine whether your deposits are safe or not:

Up To $250,000 – Deposits are ensured up to $250,000, for all funds at one bank. This means that if you (as a single depositor) have $90,000 in a CD, $85,000 in a checking account, and $75,000 in a savings account, your funds are insured. Up until recently that level was $100,000, but has been raised temporarily through December 31, 2009.

Multiple Accounts At Multiple Banks – If you keep you money at several banks, your money is ensured provided your deposits at each institution stays below $250,000. This means that if you have $2,000,000 evenly divided in accounts at eight banks, your money is covered.

Joint Accounts – If you have a joint account at a bank, those funds are ensured up to $500,000. Even at that amount, you can still have accounts in your own name which will be insured for up to $250,000.

Retirement Accounts – Your Individual Retirement Account is covered by FDIC insurance under certain conditions. These include: regular IRAs, SEP IRAs, and ROTH IRAs. FDIC insurance will cover up to $250,000 of your retirement money at any one bank.

If you have over $250,000 at any one financial institution, you are putting those funds at risk. However, the FDIC says that you’ll likely recover a portion of those funds, perhaps 80-90% of the excess amount, but that process could take weeks to resolve.

Credit Unions Are Covered In A Separate Fund

If you have funds at a credit union, including regular deposits and retirement funds, those monies are insured too, but not by the FDIC. Instead, credit unions are covered by a separate agency – the NCUSIF or National Credit Union Share Insurance Fund – which recently received Congressional approval to cover individual deposits up to $250,000, just like the FDIC.

Of course, having your funds in any financial institution means keeping track of the performance of that bank or credit union by reviewing monthly statements and following the news. Even if your bank gets into trouble, the federal government is quickly jumping in and handling everything, bringing about super mergers virtually overnight.

(Source: FDIC)

Adv. — If you’re looking for additional consumer advice, please visit our sister site at SayLowerBills.com to find information about managing your income, handling debt, and other money saving tips.


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Categories: Consumer Tips

About Author

Matthew C. Keegan

Matt Keegan is a freelance writer and editor as well as publisher of "Matt's Musings", his personal blog. Matt covers campus, consumer, business and financial topics on various websites and blogs, and has been published in the "Houston Chronicle", "Sam's Club Magazine" and "Wisconsin Golfer".