While comparing banks and bank accounts, you’ve likely seen, “FDIC-insured bank,” or “Deposits protected up to $250,000 per depositor,” or “Deposits insured by the FDIC.” They all mean the same thing, but what is the FDIC and what is deposit insurance?
What is the FDIC?
FDIC stands for the Financial Deposit Insurance Corporation. It’s an independent agency created by the US Congress in 1933 to protect funds in deposit accounts. It also supervises financial institutions for consumer protection and safety.
What is FDIC deposit insurance?
FDIC insurance protects consumers in the event of a bank failure. Thanks to FDIC coverage, deposits are insured up to at least $250,000 per depositor, per FDIC-insured bank, per ownership category.
The depositor is you, and the ownership category refers to whether the account is owned by one person (single) or is shared (joint). Deposits in this case mean funds and interest accrued in a deposit account. Deposit accounts things like checking, savings, money markets and certificates of deposit (CDs).
For example, if you have a savings account with $10,000, and the bank that issued the savings account were to fail, the FDIC would pay you the $10,000. Remember that FDIC deposit insurance is up to $250,000, so anything over that amount isn’t typically covered. For that reason, it’s often recommended to place funds in multiple banks if you often have balances over $250,000.
While having FDIC insurance is extremely important for owners of deposit accounts, bank failures are rather rare and unlikely.
Do I have to pay for FDIC insurance?
No, you don’t have to pay or apply for FDIC coverage. The insurance is automatic whenever you open a deposit account at an FDIC-insured institution. FDIC deposit insurance also applies to people who are not residents or citizens of the US, as long as the deposit is made at an FDIC-insured institution.
FDIC-insured institutions often display an FDIC sign at branches, but you can also call the FDIC or use the BankFind tool on the FDIC website, which lists all FDIC-insured institutions.
FDIC vs. NCUA insurance
NCUA stands for the National Credit Union Administration. Just like the FDIC, the NCUA was created by Congress to offer deposit insurance to credit union members.
NCUA coverage is pretty much the same as FDIC coverage. NCUA deposit insurance is at least $250,000 per federally insured credit union, per member-owner, per ownership category.
Just like FDIC insurance, NCUA coverage protects deposit accounts, such as checking and savings which credit unions typically call share accounts, and CDs which they often call share certificates.
Just remember: Banks use FDIC and credit unions use NCUA.
Is my money protected if I have multiple accounts with different banks?
Yes — as long as your deposits don’t exceed $250,000 at each bank. Let’s say you have $200,000 in savings and CDs at one bank and $200,000 in your checking account at a different bank. In the event that both banks failed, all of your money would be insured.
Personal accounts at multiple banks
Bank 1: Savings account deposit
$100,000
Bank 1: CD account deposit
$100,000
Bank 2: Checking account deposit
$200,000
Total of uninsured deposits
$0
What if I have joint accounts?
Let’s say you have $200,000 in savings, and $100,000 in a joint checking account at the same bank. If the bank were to fail, all of your money would be insured since you hold less than $250,000 in each ownership category. The CD is a single-ownership, and the joint account is another ownership category.
Joint accounts at one bank
Single account: Savings account deposit
$100,000
Single account: CD account deposit
$100,000
Joint account: Checking account deposit
$100,000
Total of uninsured deposits
$0
What types of accounts are covered by the FDIC?
FDIC deposit insurance covers a multitude of accounts, including:
The short answer is you get your money back if your bank goes bankrupt. If your institution is FDIC-insured and it goes bankrupt, you are protected so long as your account balance doesn’t exceed $250,000.
One of two things usually happens when your bank goes bankrupt:
The FDIC tries to sell all of the failed bank’s deposits and loans to a more stable institution. If this happens, your account is transferred to the new bank and you keep doing business as usual.
If the FDIC can’t find another bank to absorb the failed institution, you receive a check in the mail for your FDIC-insured deposits, usually within a few business days of your bank’s closing.
If for some reason the FDIC needs more information from you before it releases your deposit, it will send you a written notice by mail.
Exceptions to the rule: Government intervention
In exceptional cases the government may step in to offer additional assistance to consumers in the event of a bank collapse. March 2023 saw regulators take over startup- and tech-focused banks like Silicon Valley Bank and Signature Bank, unnerving investors and banking customers.
In the wake of the bank shutdowns, the FDIC performed as intended and established and transferred insured deposits to a “bridge” bank, advising those with assets of under $250,000 — the FDIC’s standard insurance— full access to their insured deposits as soon as possible.
However, federal bank regulators have promised to cover uninsured deposits as well through a series of steps designed to protect the banking system. This would protect consumer deposits beyond the standard $250,000 limit. If your bank goes under, follow the FDIC’s website to stay abreast of how the bankruptcy is handled and any additional steps you might need to take.
Do I still pay my mortgage if the bank goes bankrupt?
Yes. If your financial institution goes under, your mortgage is sold to a more stable lender. In most situations, the terms of your agreement remain the same, but you make payments to the new institution.
How effective is FDIC deposit insurance?
The FDIC was created in 1933 to promote public confidence in the US banking system and has issued billions of dollars in payouts since its inception. In fact, there hasn’t been a single depositor that has ever lost a penny of insured deposits since the FDIC was created, despite more than 500 failures since 2000 alone. Here are a few of the most recent:
Silicon Valley Bank
Washington Federal Bank for Savings
The Farmers and Merchants State Bank of Argonia
Fayette County Bank
Guaranty Bank (aka BestBank in Georgia and Michigan)
First NBC Bank
Signature Bank
Proficio Bank
Seaway Bank and Trust Company
Harvest Community Bank
Allied Bank
The Woodbury Banking Company
How do banks make money?
There are a few different ways banks make money.
Lending. Banks take the money you keep in your checking, savings, CD, and money market accounts and lend it out to others in the form of home loans, auto loans, student loans and more. Even if the bank pays you a 2% APY, it may be making anywhere from 5% to 17% on loans and credit cards.
Bank fees. Financial institutions make a killing off of the accountholder fees it charges for monthly maintenance, overdrafts, ATM usage, paper statements, early withdrawals from CDs, and so on.
Optional services. Some banks offer additional services, such as investment management, safety deposit boxes and payment processing for businesses. All of these extras bring in revenue for the bank.
Interchange fees. When you use your debit card to buy something, the store pays an interchange fee to your bank and the store’s bank, usually 21 cents plus 0.05% of the total transaction.
How do banks go bankrupt?
Banks typically fail when they can no longer meet their obligations to depositors. Some common reasons include:
They lend out too much money. When banks don’t keep enough cash on hand, they may have to borrow money from the Federal Reserve or another bank. If the bank doesn’t have a good lending record or strong collateral, it could risk failing.
Lending is too risky. Loans are often the biggest moneymaker for banks. If they lend to risky individuals or businesses who can’t make repayments, it could create problems that lead to the bank’s demise.
Funding issues. Banks have a long list of assets on their balance sheets. If they get in a position where they can’t repay their debts, it could fail.
Significant shifts in the market. When banks don’t plan for economic downturns, it can lead to huge losses that force it to close its doors.
Vulnerabilities of bank accounts
Even though your money is often protected by FDIC deposit insurance, bank accounts still have a number of vulnerabilities.
Fraudulent activity. It’s important to keep an eye out for suspicious behavior both online and in public. You should never give out your bank account information (account number, PIN, etc.) or use your credit card on websites you do not trust. If someone gets a hold of your bank account or credit card information, you should contact your bank immediately.
Mistakes. Mistakes happen. Bank or merchant errors can lead to you being overcharged or incurring unnecessary fees. Check your statements and keep electronic or paper copies for reference, and call or visit your bank if you think there is an error. Some banks offer text message alerts that can help you stay on top of your account activity.
Phishing and other online scams. Phishing scams and malware can lead to your account being compromised, so it’s important to keep an eye out for any suspicious behavior when you’re online. Avoid any links, sketchy websites or email attachments from unfamiliar sources, as scammers can set up fake websites and viruses to steal your information.
Hacking passwords. With online banking becoming more popular every day, it’s even more important to make sure your passwords are secure. You should always create strong and unique passwords with a mix of upper- and lowercase letters, numbers and special characters if possible. You should avoid using your name or other obvious words and should never use the same password for multiple accounts. If it’s available, 2-factor authentication can provide an extra layer of protection to keep your account secure.
Phone scams. Watch out for phone calls or text messages from phone numbers claiming to be your bank. Your bank will never contact you to ask for account information, so if you are unsure about the sender, you can hang up and call the bank directly to speak with customer service.
ATMs. Scammers have been known to place fake card scanners called “card skimmers” over ATM card slots, which can lead to your account information being copied or stolen. Before using an ATM, it never hurts to wiggle the card slot to check if anything feels loose.
Unsecured Internet access. Watch out for public Wi-Fi when accessing your account and check for https encryption. Hackers may connect to unsecured networks in hopes of intercepting your account information or passwords, so it’s best to do your online banking at home.
Is your money safe with your bank?
While there have been some major banks collapse in recent memory, most Americans (72%) believe that their money is safe in their bank.
Bottom line
Most checking, savings, CD, and money market accounts in the US are offered by banks that carry FDIC insurance, so your money is protected if the institution goes belly up. Generally speaking, that assurance frees you up to focus on comparing savings accounts that best meet your financial needs, like those that offer a competitive interest rate, low or no fees, low or no minimum balances and convenient ways to access your money.
Cassidy Horton is a freelance personal finance copywriter and past contributing writer for Finder. Her writing and banking expertise have been featured in Forbes Advisor, Money, The Balance, Money Under 30, Insure.com, and other top digital publishers. She holds a BS in public relations and an MBA from Georgia Southern University. See full bio
Bethany Hickey is the banking editor and personal finance expert at Finder, specializing in banking, lending, insurance, and crypto.
Bethany’s expertise in personal finance has garnered recognition from esteemed media outlets, such as Nasdaq, MSN, Yahoo Finance, GOBankingRates, SuperMoney, AOL and Newsweek. Her articles offer practical financial strategies to Americans, empowering them to make decisions that meet their financial goals. Her past work includes articles on generational spending and saving habits, lending, budgeting and managing debt.
Before joining Finder, she was a content manager where she wrote hundreds of articles and news pieces on auto financing and credit repair for CarsDirect, Auto Credit Express and The Car Connection, among others.
Bethany holds a BA in English from the University of Michigan-Flint, and was poetry editor for the university’s Qua Literary and Fine Arts Magazine. See full bio
Bethany's expertise
Bethany has written 435 Finder guides across topics including:
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