When the economy slumps and one or more financial institutions fail, many savers begin to worry about the stability of their own bank -- and what will happen to their own checking, saving, and other bank accounts. Created to avoid a run on the banks, the Federal Deposit Insurance Corporation (FDIC) can provide some peace of mind if you know what it does and how to maximize the protection of your money.
Nobody can guarantee the success or longevity of a particular bank, but the FDIC, an independent government agency, does the next best thing by insuring customers' deposits in most U.S. banks and savings associations. If an insured institution fails (in other words, closes because it can no longer meet its obligations), the FDIC reimburses qualified account owners dollar-for-dollar for losses -- but only up to the insurance limit.
To avoid having any of your bank deposits at risk, learn exactly which accounts the FDIC insures, how much protection the insurance provides, and how you would recover your money if your bank failed.
Who and What Is Covered?
You do not have to be a citizen, a U.S. resident, or even a person to be covered by FDIC insurance. All depositors, including businesses and other entities, are eligible for coverage.
FDIC insurance covers the following types of deposit accounts established with insured institutions:
- NOW (essentially, interest-earning checking accounts)
- money market deposit accounts (MMDAs)
- certificates of deposit (CDs), and
- cashiers' checks, money orders, and other "official checks" drawn on the institution.
The easiest way to know if your bank or savings association is insured is to look for the official FDIC sign -- it must be displayed at each teller window. You can also call the FDIC toll-free (877-275-3342) or use the FDIC's "Bank Find" feature, at www.fdic.gov/deposit, to look up your bank.
What Is Not Covered?
The following are not FDIC-insured, even if they are offered by an insured bank:
- mutual funds
- life insurance policies
- treasury securities
- other investment products, and
- contents of a safe deposit box (though you may be covered by the bank's private insurance or your homeowner's insurance).
What About Credit Union Accounts?
Deposits in credit unions aren't covered by the FDIC. However, federal credit unions are required to be members of the National Credit Union Share Insurance Fund (NCUSIF), administered by the National Credit Union Administration (NCUA). This provides deposit insurance for credit unions in much the same way as the FDIC provides insurance for banks.
Look for the NCUA logo at your credit union's teller stations. The standard maximum limit is $250,000 per individual account holder, per federally insured credit union. (To check on whether your credit union accounts are fully covered, use NCUSIF's coverage estimator at http://webapps.ncua.gov/ins.)
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