Frequently asked questions about bank security and deposit insurance

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Finding out if a particular bank is federally insured and a safe place to park your money should be at the top of your to-do list when you’re looking to open a new account, such as a savings account or certificate of deposit (CD).

The Federal Deposit Insurance Corporation (FDIC) insures more than 4,700 commercial banks and savings institutions in the United States. Insured financial institutions prominently display the FDIC membership sticker in their branches or post it on their websites. To confirm whether your bank is FDIC insured, you can also use the FDIC’s BankFind Suite tool.

Bankrate has put together these frequently asked questions about bank safety and deposit insurance to help you make sure your money is safe and give you steps to protect yourself.

How Much Does FDIC Insurance Cover?

The standard deposit insurance coverage limit is $250,000 per depositor, per FDIC bank, per property category. So each depositor is insured for at least $250,000 per FDIC-insured bank.

Is that $250K for one bank or one account?

At any FDIC-insured bank where you have deposits, your money up to $250,000 is protected. For example, if you have $250,000 in deposits at Bank A and $250,000 in deposits at Bank B, you have $500,000 of coverage.

If you have funds in different banks, but those banks have the same FDIC certificate, however, you may not have as much insurance protection as you thought you did. The BankFind tool mentioned above can help you with this.

You can have several accounts in one bank and be secured. The combined depositor balance of checking, savings and other traditional deposit accounts is insured up to $250,000. If your deposits are held in different ownership categories at the same bank (such as single accounts, joint accounts, irrevocable trust accounts and revocable trust accounts), they are separately insured.

Use the FDIC’s Electronic Deposit Insurance Estimator (EDIE) to calculate how much of your money is insured.

Contact your bank or call the FDIC if you have additional questions about coverage.

I deposited $250K. Is the profit earned from this insured?

The FDIC insurance limit of $250,000 includes principal and interest. If you deposit $250,000 and it earns $4,000 in interest, you are only insured for $250,000 if your bank fails. If you deposit $245,000 and accrue $5,000 in interest, you are insured for the principal plus all of your interest, as long as it does not exceed the FDIC’s $250,000 insurance limit.

Some deposits that exceed $250,000, such as those tied to trusts, may be eligible for more coverage. In that case, the FDIC will review the accounts and make a decision.

Does the insurance cover savings, CDs and money market accounts?

FDIC insurance covers traditional bank deposit products, including checking and savings accounts, time deposits such as CDs, money market deposit accounts, order-withdrawal (NOW) accounts, as well as cashier’s checks, money orders, and other official items issued by banks .

It does not cover investment products such as mutual funds, stocks, bonds and annuities, even if you purchased them from an FDIC-insured bank. Nor does it cover the contents of safes.

What about money market funds?

Money market mutual funds, which are invested in low-risk securities, are not insured by the FDIC, even when you buy them from a bank.

Money market accounts, on the other hand, are traditional interest-bearing deposit products that are federally insured as long as they are deposited at an FDIC-insured institution. They are subject to an insurance limit of $250,000.

Are online banks insured?

Just because a financial institution doesn’t have branches doesn’t mean it isn’t federally insured. There are many online banks that are FDIC insured. Online banks often pay depositors higher interest rates on CDs and savings accounts because they have fewer overhead costs than brick-and-mortar banks.

Before working with an online bank, make sure it is a legitimate bank and not a fake website. The FDIC’s BankFind tool can be used to check if an online bank is insured. You can also call the FDIC at 877-275-3342 and ask to speak with a deposit insurance specialist to confirm whether an online bank is FDIC insured.

One important thing to remember: FDIC insurance protects deposits in failed banks — not lost deposits due to online theft or fraud.

Are credit unions insured?

Credit unions are insured by the Stock Insurance Fund of the National Credit Union Administration. As of December 31, 2022, there were 4,760 federally insured credit unions in the US

The National Credit Union Administration administers the fund, which insures member deposits up to $250,000. The fund is backed by the full faith and credit of the United States. The Equity Insurance Fund also separately protects IRA and Keogh retirement accounts up to $250,000 each and separately insures revocable and irrevocable trust accounts.

NCUA says on its website that credit union members have never lost a cent of insured savings at a federally insured credit union.

What if my bank goes bankrupt?

If your bank fails, you do not need to file a claim with the FDIC to recover your deposited funds. The FDIC will act quickly to cure you by setting up a new account for you at another insured bank that is equal to the insured balance at the failed bank; or will issue you a check for your insured balance in the failed bank.

Certain deposits that exceed $250,000 may be eligible for coverage, such as deposits related to trusts or deposits created by a third-party broker. In these cases, the FDIC reviews the accounts and determines the amount of deposit insurance available to them.

When banks fail, the FDIC becomes the receiver of the bank’s assets and is responsible for collecting and selling those assets to settle the bank’s debts, including claims on deposits that exceed $250,000. Selling off a failed bank’s assets can take years. As the assets are sold, the FDIC will make periodic payments to depositors for their uninsured funds.

How to check the financial status of a bank or credit union

You can use the FDIC’s BankFind tool to gather information about an FDIC-insured bank, including detailed financial information, its operating status, and how to contact a bank regulator for information or assistance. The FDIC also publishes a list of failed banks.

To find out about the financial performance of a federally insured credit union, use NCUA’s Credit Union Research Tool. The NCUA also publishes a list of credit unions that have failed or have been placed under receivership.

Why was the FDIC created?

The Federal Deposit Insurance Corporation was created during the Great Depression when President Franklin D. Roosevelt signed the Bank Act of 1933. On January 1, 1934, the FDIC began insuring bank deposits of up to $2,500. Panicked bank customers, fearing they would never see their money again, had withdrawn their deposits and crippled the banking system.

Roosevelt and some of his advisers opposed the creation of the FDIC. They thought it would be too expensive and unfairly prop up poorly run banks. But Americans wanted protection and got it. Deposit insurance stabilized the banking system and helped restore public confidence in it.

The FDIC has been a safety net for depositors ever since. The FDIC insures deposits in failed banks. It is financed by insurance premiums paid by financial institutions and income from investments. Payouts come from the FDIC’s Deposit Insurance Fund.

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