If bank fails, FDIC protects your money
Dollars and Sense
In a shaky economy, the last thing you want to worry about is the health of your bank and whether your money will be safe should the bank fail.
You need not worry.
The Federal Deposit Insurance Corporation was created by Congress in 1933 to cover accounts in the event of bank failure. In the FDIC’s 75-year history, no depositor has ever lost any money due to a bank failure.
The FDIC covers deposit accounts up to the federal limits. For checking and savings accounts, certificates of deposit (CDs) and money-market deposit accounts, that limit is $100,000 per depositor per institution. A joint account is covered for $100,000 for each person. IRA deposits are covered up to $250,000.
However, depositors can qualify for more coverage at one bank if their funds are in different “ownership” categories, such as trusts with named beneficiaries.
If a bank fails, the FDIC moves quickly to give depositors access to insured funds, generally on the next business day. If deposits exceed the FDIC limits (for example a single account with $120,000), it’s still possible to recover the uninsured money, depending how the FDIC handles the bank’s assets and how much it recovers. The assets might be sold and the depositor could receive an initial payment on uninsured money within a few days or weeks.
In the event of a bank failure, the FDIC does one of two things. It transfers deposits to a new bank, or it creates a new “bridge bank” that will be operated by the FDIC until a buyer for the bank can be found.
If your bank fails, you have two options. You can keep your money where it is and let the FDIC transfer your cash to a new bank. You’ll likely only have to change your checks and ATM card.
Or you can withdraw your money and take it to a new bank. Logically, however, a bank that’s just been taken over is under the scrutiny of the FDIC and is probably even safer than another bank to which you might choose to transfer your funds.
For specific questions on coverage for your accounts, call the FDIC toll-free 1-877-ASK-FDIC (1-877-275-3342).