Federal Deposit Insurance Corporation (FDIC)

Recently the limits on insured amounts has changed from $100,000 to $250,000, but what is the FDIC and what does it mean to me?

After the stock market crash of 1929, people pulled their money out of the banks, because they had fears that their deposits would disappear along with the banks. The very act of pulling out the deposits puts the banks in jeopardy. In order to avoid this chicken and the egg dilemma, the government decided to insure bank deposits, so people would have faith that their money would not disappear if the banks disappeared.

FDIC Insurance

  • $250,000 in single accounts
  • $250,000 in joint accounts
  • $250,000 in retirement accounts

The insurance covers savings, checking, CDs and money market deposit accounts. It does not cover any risky investments like stocks, mutual funds and bonds.

Coverage is limited to $250,000 per depositor per bank. If you have less than $250,000 in combined your insured accounts at a bank, then you’re covered. If you have more than $250,000 in one bank, you might want to consider opening an account at another bank. If you have $500,000, you can put $250,000 in one bank and $250,000 in another and be fully insured. Married people have a bonus, because joint accounts are separately insured. A couple could have $1,000,000 insured at a single bank. $250,000 for each of their individual accounts and $250,000 each for a joint account. Certain retirement accounts are FDIC insured and they are also considered separate from individual and joint accounts, adding even more that could be possibly insured at a single bank.

I’ve heard if your bank disappears, you can recover the principal from the FDIC pretty quickly, but the interest takes longer to get. The best case scenario is to avoid a bank that is in danger of going under. Just like stocks, you need to diversify your banks.

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