Since the news has been filled with stories of America's current "economic crisis", I gotten to thinking about how many customers come into our bank everyday, asking a lot of questions about the safety of their money and what the government can actually do for them. This led me to believe that maybe not everyone is familiar with banking insurance, also known as the FDIC. So, in order to educate them, I had to educate myself. I pulled together the majority of the information we've been given on what exactly the FDIC is and how it benefits our customer. Naturally, I thought about sharing my information here, so that maybe you will have peace of mind with your bank. Here are some question we frequently get on a day to day basis (most answers are pulled right from the FDIC website):
What is the FDIC?
It's short for the Federal Deposit Insurance Corporation. It's an independent agency of the US government.
What is the purpose of the FDIC?
It's set up to protect depositors' funds in the event that a financial institute were to fail. It covers the balance of each account, dollar-for-dollar, up to the insurance limit, including principal and interest up to the date the institution closes.
What is the FDIC insurance amount?
Originally $100,000.00 per depositor, per bank. Current limit is $250,000.00 due to congress raising the limit. This covers any interest bearing account (excluding certain money markets, stocks, municipal bonds/bonds, safe deposit boxes, etc). A program has been set up to allow any financial institution account that is non-interest bearing to be insured up to the account balance. It is up to each instiution whether to abide by this program or to default to the $250,000.00 limit. You'll have to check with your individual bank to see whether they're a participant or not.
Christmas Club accounts, Cashier's checks, CDs, loan disembursment checks, etc are also covered by FDIC insurance.
The FDIC has set up a calculator for customers to check exactly how much of their money is insured. You can find it at FDIC: Electronic Deposit Insurance Estimator (EDIE) Online Version
What happens when a bank fails?
There are really different answers for this.
In the case of one individual bank, the FDIC would either transfer the depositor's account to another FDIC insured bank, or give the depositor a check equal to their balance (including principal and interest).
In the case of multiple bank failures, we've been told the FDIC would literally come in and take over the institution so they would not get to the point of closing.
The majority of the FDIC insurance changes are expected to last until 12/31/09, giving accounts the chance to become stable.
Also, as a warning, if you hear about a CD deal advertising a percentage far above market value (4.5 - 5.0% or more) please be cautious. When banks raise CD levels to percentages well above market, it's usually to make up for the excess money they've loaned out. These CDs will have a tendency to have many strings attached, such as having to open an additional account or taking out a second mortgage.
I hope this clears up a few questions you may have, instead of making more muddy water for you. 😉
What is the FDIC?
It's short for the Federal Deposit Insurance Corporation. It's an independent agency of the US government.
What is the purpose of the FDIC?
It's set up to protect depositors' funds in the event that a financial institute were to fail. It covers the balance of each account, dollar-for-dollar, up to the insurance limit, including principal and interest up to the date the institution closes.
What is the FDIC insurance amount?
Originally $100,000.00 per depositor, per bank. Current limit is $250,000.00 due to congress raising the limit. This covers any interest bearing account (excluding certain money markets, stocks, municipal bonds/bonds, safe deposit boxes, etc). A program has been set up to allow any financial institution account that is non-interest bearing to be insured up to the account balance. It is up to each instiution whether to abide by this program or to default to the $250,000.00 limit. You'll have to check with your individual bank to see whether they're a participant or not.
Christmas Club accounts, Cashier's checks, CDs, loan disembursment checks, etc are also covered by FDIC insurance.
The FDIC has set up a calculator for customers to check exactly how much of their money is insured. You can find it at FDIC: Electronic Deposit Insurance Estimator (EDIE) Online Version
What happens when a bank fails?
There are really different answers for this.
In the case of one individual bank, the FDIC would either transfer the depositor's account to another FDIC insured bank, or give the depositor a check equal to their balance (including principal and interest).
In the case of multiple bank failures, we've been told the FDIC would literally come in and take over the institution so they would not get to the point of closing.
The majority of the FDIC insurance changes are expected to last until 12/31/09, giving accounts the chance to become stable.
Also, as a warning, if you hear about a CD deal advertising a percentage far above market value (4.5 - 5.0% or more) please be cautious. When banks raise CD levels to percentages well above market, it's usually to make up for the excess money they've loaned out. These CDs will have a tendency to have many strings attached, such as having to open an additional account or taking out a second mortgage.
I hope this clears up a few questions you may have, instead of making more muddy water for you. 😉
R
Randy Giles
cool