What Is FDIC Insurance?

When checking out all these whippersnapper online banks with their crazy high interest rates, you gotta make sure they’re FDIC Insured so you’re protected if they go under. But what does FDIC Insured actually mean? My Money Blog probes.

First off, FDIC Insured deposits are guaranteed up to $100,000 . However,

1. Banks still fail, and without warning.
2. If your money is insured, it is unlikely any failure will interrupt access to your funds for long. Either another bank will take over (they all want more deposits), or the FDIC will pay out from their reserves.
3. Never exceed FDIC insurance limits, because you may never see your uninsured money again.

Always check for the FDIC Insured logo, pictured above, on the bank’s site or marketing materials. Otherwise, take your money elsewhere. — BEN POPKEN

FDIC Insurance: What If My Bank Fails? [My Money Blog]
RELATED: Who is the FDIC? [FDIC.gov]

Comments

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  1. B says:

    Also, make sure the bank isn’t run by Neil Bush.

  2. radioboy says:

    Isn’t this taught in 8th grade history class when you learn about the New Deal?

  3. FLConsumer says:

    It’s not enough to have the bank claim that they’re FDIC insured — VERIFY IT at the FDIC’s website. There’s quite a few banks and investment scams, especially on-line, which claim to be FDIC insured. Some even claim to be additionally insured by famous insurance houses such as Chubb or Lloyd’s of London, AIG…but are not.

    Here’s an active story about the producer who made the boy bands NSync and Back Street Boys and how we made off with $317 million of investors’ money:
    http://www.usatoday.com/money/companies/regulation/2007-04

    The story neglects to mention the additional ~$200 million he also bilked banks out of.

    If you want a blow-by-blow account of the whole Pearlman saga:
    http://blogs.tampabay.com/money/


    Pearlman even made up fake documentation to suggest his accounts were legitimate, even included a fake Lloyd’s of London insurance certificate. (Photoshop anyone?) Do the legwork yourself, don’t expect a scammer to be truthful.

    Here’s where to verify the bank you are planning on, or already have money with:
    http://www.fdic.gov/deposit/index.html

    If the name & address don’t line up, contact the bank listed on the FDIC website and verify that they’ve authorized the bank/website you’re looking into is authorized by them or is a subsidiary.

    Likewise, for credit unions, there’s NUCA, with similar coverages to FDIC:
    http://www.ncua.gov/ConsumerInformation/index.htm

    Having worked with the FDIC on a couple of projects, I must say that I’m VERY impressed. They’re quick, know what the hell they’re doing, and don’t mess around. If your bank goes under, they’ll likely have it going in 5 business days or less. Very likely, less.

  4. smelendez says:

    Some states also provide insurance for state-chartered banks above the FDIC limit. I know Massachusetts and Indiana do, for instance.

    I’ve actually been saying ads by various banks lately advertising higher rates for deposits above $100K. It doesn’t seem as simple to me as “never exceed the limit,” since people obviously have other investments that aren’t insured. Like anything else, you have to balance the risk of bank failure against the interest rate.

  5. ColinColin says:

    For your readers in Canada:

    Look for CDIC insurance:

    Quote:

    Banks in Canada can fail. It does not happen often, but it has happened and it could happen again. If your bank or other CDIC member fails or goes bankrupt and your savings are covered by CDIC, you will get up to $100,000 of your savings back. If your savings are NOT covered, you might lose them.

    Your savings are covered…

    * If your bank (or the institution you bank with) is a member of CDIC.
    We only insure savings if they are at one of our member institutions.

    and…

    * If the accounts or financial products you have are insured by CDIC.
    We only insure certain types of savings.

    Member list: http://www.cdic.ca/1/3/1/7/index1.shtml

    What is insured:
    http://www.cdic.ca/1/5/2/7/index1.shtml

  6. mac-phisto says:

    the limits are actually $100,000 per depositer PLUS another $250,000 for retirement accounts. so, if you have a savings w/ $95,000 & an IRA with $240,000 then you’re covered in the same institution.

    also, note it is PER DEPOSITOR. so, if you have a joint account, you are actually covered for $200,000/$500,000. there’s questions as to how this works across multiple accounts, esp. in regards to minors, but the general consensus is that a family of four would collectively be covered at $400,000/$1,000,000.

  7. Anitra says:

    Since we’re always recommending credit unions around here… If you use a credit union, your money may be insured by the NCUA instead of the FDIC.

  8. jaewon223 says:

    If anybody is wondering paypal.com IS NOT FDIC insured.

  9. Frank Grimes says:

    All you have to do is read a little bit about the 1991 Banking Crisis in Rhode Island which is a frightening instance of what happen’s when the safety net is yanked away. RI had state sponsored insuarnce that crashed and burned and when this was discovered, the governor had to freeze the accounts at over 30 banks and 45 credit unions. Many people lost all their savings or it took years to get the money back. Our government may be inept in many ways but the FDIC, you would like to think, would never let this happen.

  10. shdwsclan says:

    Whomever keeps money in paypal, has to be out of their mind. Paypal is worse than American Express when it comes to chargebacks…..
    Its good for the buyer, but horrible for the seller, and most people have it both ways, so if you neg a chargeback on moneybookers for example, then will go into your paypal account, which you use to buy, and withdraw money for the chargeback.

    I have a paypal account, but I remove my bank information from it and chose mail verification and I use a credit card to pay.

    I use moneybooker when I sell.

    I have never been hit with a chargeback, but I continuously hear of other people’s horror stories, so it may eventually happen to me…

  11. Crim Law Geek says:

    Emphasis on the $100,000 per depositor. If you have $100K in bank A and $100K in bank B and they both fail, you will only get $100K from FDIC. The same applies if you have 2 separate $100K accounts in the same bank and it fails.

  12. bill-the-cat says:

    There’s some misinformation in the above comments. Individuals’ single accounts are insured for $100M per bank. That is why programs like CDARs exist – to get around the insurance limit by sending your money out to multiple banks. You could have literally millions in banks across the USA and still have every cent be FDIC-insured.

    The FDIC has a brochure on their site called “Your Insured Deposit”; the brochure can be accessed at http://www.fdic.gov/deposit/deposits/insured/yid.pdf

    The brochure details the different limits available at the same institution (i.e., single accounts, joint accounts, retirement accounts, and trust accounts).

  13. IRSistherootofallevil says:

    I think I’ll just keep my money in a Switzerland.

  14. Kogita says:

    @thirdgen: Are you saying that after you get 100K back from FDIC, no matter where you put your money, they’ll never pay you back again?

  15. edjusted says:

    @Crim Law Geek: That’s not what the FDIC web site says. Read bill-the-cat’s post. On the brochure he links to, it very clearly says “The basic insurance amount is $100,000 per depositor, per insured bank.” Also, under some circumstances, you’re insured for amounts over $100k per person.