Early 2023 brought the unexpected closure of two major banks, Silicon Valley Bank and Signature Bank. Thankfully, customers were protected for up to $250,000 thanks to the Federal Deposit Insurance Commission, or FDIC. The FDIC shelters consumers from major financial consequences in the event of a bank closure or bankruptcy. Learn more about the FDIC and how it protects your deposits in FDIC-insured checking, savings, money market and CD accounts.
What is FDIC insurance?
FDIC insurance reimburses you for up to $250,000 in insured deposits if your bank were to collapse or fail. All FDIC-insured institutions pay insurance premiums to the Federal Deposit Insurance Corporation (FDIC), which is how your money is guaranteed.
FDIC deposit insurance limit
The $250,000 limit applies per depositor, per institution and per ownership category. But what does that mean exactly? Ownership category simply refers to whether the account is owned by one person (single) or is shared (joint). Depending on the size of your deposits, it might make sense to hold accounts at different institutions to ensure that all of your money is covered.
Consider the scenario in the table below. If you hold $200,000 in savings and CDs and $100,000 in checking, you would lose $50,000 if your bank failed. Personal accounts at one bank
Savings account deposit
$100,000
CD account deposit
$100,000
Checking account deposit
$100,000
Total of uninsured deposits
$50,000
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 CDs and $100,000 in a joint checking account, though all accounts are 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.
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
Do I need to apply for FDIC deposit insurance?
No. FDIC deposit insurance automatically applies to deposits at FDIC-insured financial institutions, so you won’t need to apply or take any further steps. As long as your funds are deposited at an institution that is FDIC-insured, you will be covered for up to $250,000 in the event that the institution fails. FDIC deposit insurance even applies to people who are not residents or even citizens of the US, as long as the deposit is made at an FDIC-insured institution.
How do I know if an institution is FDIC-insured?
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.
What types of accounts are covered by the FDIC?
FDIC deposit insurance covers a multitude of accounts, including:
Will you get your money back if your bank goes bankrupt? The short answer is yes. 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
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