Have you ever wondered that if you had more than $250,000 in your bank, that it would be insured by the FDIC? Well, wonder no more, because here’s what you need to know if you have that much cash lying around.
First, FDIC is short for Federal Deposit Insurance Corporation. It is an independent agency of the United States government that protects you against the loss of your insured deposits if an FDIC-insured bank fails. FDIC insurance is backed by the full faith and credit of the United States government. The FDIC insures up to $250,000 per person, per bank, per ownership category. If you have money in a credit union, don’t fret. They are insured under the same terms by the National Credit Union Administration (NCUA).
Coverage is automatic whenever you open an account at an FDIC-insured bank. Not all banks are FDIC insured, so please check your bank by going here: FDIC’s BankFind tool.
If a bank closes, the FDIC usually pays insurance within two business days, either by providing depositors with a new account at another insured bank or by issuing a check for the insured balance of the account at the failed bank.
Now that you know how FDIC insurance works, here are a couple of easy ways to get the most out of it:
- Open accounts at different FDIC-insured banks. For example, if you have $400,000, you can have a bank account at two different banks to have your 400k fully insured, even if they have the same account title.
- If you want to keep all your money at one bank, you can open accounts with different account titles. Say, for instance, that you are married and have $1 million that you want insured at a single bank. Here’s how you can do it: open a joint account with you and your spouse as the owners and then open an individual account for you and another one for your spouse. The joint account has $250,000 insurance per each joint owner, for a total of $500,000 coverage. Each individual account has $250,000 FDIC insurance as well. This will give you FDIC insurance on your entire $1 million, all at the same bank. You can also use IRAs, trusts, etc. to insure even more at the same bank.
Shoot me an email if you have any questions.
Joe Baker, CFP®
Baker Asset Management, LLC
joebaker@bakerassetmanagement.com
