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Federal Deposit Insurance Corporation (FDIC)


What is FDIC?:

FDIC stands for the Federal Deposit Insurance Corporation. The FDIC was created back in 1933 in response to the many bank failures during the Great Depression. Prior to FDIC, if you had deposits at a bank, and the bank failed, you lost your money. Now, if you have deposits in an FDIC insured account, this government agency guarantees those deposits.

What, and How Much is Insured?:

While the FDIC does insure deposits, there are limits. FDIC will insure deposits up to $250,000 per account (until January 1, 2010), at a single financial institution. Typically, the insured accounts include checking, savings, money market, and certificate of deposit accounts.

What if I Have More Than $100,000 at the Bank?:

Even though the maximum amount insured is $250,000 per account per bank, it is possible for an individual to have even more money protected at a single institution. That is because the FDIC looks at how accounts are owned when determining the limit. Deposits maintained in different categories of legal ownership at the same bank can be separately insured. Therefore, it is possible to have deposits of more than $100,000 at one insured bank and still be fully insured.

What About Retirement Accounts?:

If you have assets in certain retirement accounts such as an IRA at an insured bank, those accounts may be covered up to $250,000. Keep in mind that this only includes retirement accounts that are bank deposits, such as a CD IRA. If you own mutual funds or other investments through a brokerage account at your bank, those assets are not included. If you are unsure as to whether or not your retirement funds are insured by FDIC, you should contact your bank for more information.

What Happens if My Bank Fails?:

Federal law requires that the FDIC makes insured funds available as soon as possible. In most cases, this occurs by the next day. Generally, the FDIC finds another bank that is willing to take over, or buy the rights to the failing bank. This would mean all existing customers immediately become customers of the new bank, and business continues as usual.

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