FDIC Insurance Limits and Beyond: Tips for Securing Your Bank Deposits

FDIC Insurance Limits and Beyond: Tips for Securing Your Bank Deposits

The recent collapse of Silicon Valley Bank once considered a stronghold for tech startups, was a shocking event that raised concerns about bank deposits’ safety. The Federal Deposit Insurance Corporation (FDIC) stepped in immediately to protect depositors at both Silicon Valley Bank and Signature Bank in New York, but the incident has left many wondering if their deposits are truly safe.

Fortunately, almost all banks in the United States are covered by FDIC insurance, meaning customers receive coverage automatically. In exchange, banks must adhere to strict asset management and financial reporting regulations or face being taken over by the FDIC. Credit union deposits are also insured through the National Credit Union Administration (NCUA).

FDIC insurance works by covering bank deposits up to $250,000 per customer on the rare occasion when a bank fails. The FDIC may set up a separate bank to handle customer accounts or sell the bank to a bank that agrees to take over the deposits. Customers can access their insured money immediately in some cases, while in others, they may have to wait a day or more.

The FDIC insurance limits per customer per bank apply to single accounts, joint accounts, qualified retirement accounts, business accounts, accounts held by government agencies, irrevocable trusts, and beneficiaries of revocable trusts. However, people with more than $250,000 in any bank can increase their coverage by taking advantage of different account structures.

Most bank certificates of deposit (or CDs) are covered by FDIC insurance up to $250,000, and money market deposit accounts at banks are also FDIC-insured. However, money market mutual funds offered by brokerage firms and mutual fund companies are not federally insured.

The Silicon Valley Bank collapse is a reminder to check your accounts, especially if you or your business carry large balances at a single bank. It may be time to consider moving some funds to a second bank to maintain deposit insurance. While bank failures in the U.S. are rare, it’s always best to be prepared and informed about how FDIC insurance works to protect your deposits.

Learn more about FAQs about the FDIC and deposit insurance.

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