Protecting Your Money: Understanding FDIC Insurance and How It Keeps Your Deposits Safe
Your bank account is more than just a place to store your money. It’s a financial lifeline that helps you manage your day-to-day expenses and build a secure financial future. But how can you be assured your funds will be safe? Fortunately, the Federal Deposit Insurance Corporation (FDIC) is here to protect your deposits and give you peace of mind. In this post, we’ll answer some common questions about FDIC insurance.
What is the FDIC?
The FDIC is a government agency that provides insurance to depositors across the country. It was established in 1933 to help restore confidence in the banking system during the Great Depression.
Today, the FDIC insures deposits at thousands of FDIC-insured banks and savings associations. The insurance is backed by the full faith and credit of the US government, which means that even if the FDIC runs out of money, depositors are still protected.
What is Deposit Insurance?
Deposit insurance is a program the FDIC offers that protects depositors if an insured bank fails. It is obtained automatically when an individual opens an account at an FDIC-insured institution. This insurance covers deposit accounts such as checking and savings accounts, money market accounts, certificates of deposit, and most IRA retirement accounts.
Are All Banks FDIC-Insured?
Not all banks are FDIC-insured. For example, credit unions are not FDIC-insured but are insured by the National Credit Union Administration (NCUA).
To qualify for FDIC insurance, a bank must be chartered by the federal or state government and meet specific requirements for safety and soundness. However, all FDIC-insured banks will display an FDIC sign, and you can use the BankFind tool on the FDIC website to check if a bank is insured. For example, you will find FDIC signage in every Traditions Bank branch, signifying that we are FDIC-insured. Additionally, you can call a toll-free number at 1-877-275-3342 to confirm a bank’s insurance status.
What’s the Difference Between Deposit Products and Ownership Categories?
Deposit products are the types of accounts that are covered by FDIC insurance. These include checking and savings accounts, money market accounts, certificates of deposit, and most IRA retirement accounts. On the other hand, ownership categories refer to how the account is owned. For example, an individual account is owned by one person, while two or more people own a joint account.
How Much FDIC Insurance Coverage Do Depositors Receive Per Account Ownership Type?
FDIC insurance coverage is determined by account ownership type, not by the kind of deposit product.
You can find a breakdown of coverage by account ownership in the “Deposit Insurance at a Glance” brochure embedded below.
So, let’s say a married couple has a joint checking account. Each account holder is insured up to $250,000, meaning that the joint account is insured up to $500,000.
If, however, a depositor has over $250,000 in a single FDIC-insured institution, their funds above that amount may not be covered. To maximize FDIC insurance coverage, spreading funds across different ownership categories or banks may be necessary. By having multiple ownership types, your coverage will be increased, even at one FDIC-insured bank.
If you’d like to learn more about how insurance rules and limits apply to specific deposit accounts, check out the FDIC’s Electronic Deposit Insurance Estimator (EDIE).
At Traditions Bank, we know managing your funds can seem overwhelming. Our banking professionals are well-versed in FDIC insurance laws and requirements. We’re dedicated to assisting you in safeguarding your funds and helping you maximize your coverage.
Contact us today to learn more. We look forward to helping you reach your financial goals.