The 2008 financial meltdown definitely changed how we look at bank safety.
It’s understandable that several clients are calling lately to ask us how safe their money really is at their banks.
So let’s review the basics of banking safety.
Your insured deposits are protected for up to $250,000 by the Federal Deposit Insurance Corporation (FDIC). The FDIC, in turn, is backed by the full faith and credit of the United States government. To verify that your bank is FDIC-insured, look for the FDIC sign, ask a bank representative, or use the FDIC’s BankFind tool.
FDIC insurance covers all types of bank deposits at an insured bank, including deposits in a checking account, savings account, or certificate of deposit (CD).
(Note that FDIC insurance does not cover other financial products and services that banks may offer, such as stocks, bonds, mutual funds, life insurance policies, annuities or securities.)
Federally insured credit unions are just as safe as FDIC-insured banks, and rely on National Credit Union Share Insurance Fund (NCUSIF) insurance protection, which provides the same $250,000 insurance.
You may be eligible for additional FDIC insurance coverage depending on how your accounts are titled. For example, a joint account is protected for $500,000 or more, or $250,000 for each co-owner (two owners equals $500,000 of coverage, and so forth).
So, in answer to many of our clients’ questions, “yes, your money is safe at the bank or credit union” assuming you are covered by FDIC or NCUSIF insurance protection for the full amount on deposit.
A bank failure is an unlikely event, but to be prudent, you should respect the FDIC insurance limits and not exceed them.
Take a moment to make sure that your accounts are covered and that you’re below the maximum insured amounts. If you keep more than $250,000 on deposit, spread the funds among different insured banks or across different account titles. We can help you do that inside your brokerage account, as well, by purchasing bank CDs from different financial institutions, with each eligible for FDIC coverage up to the limit.