How FDIC Insurance Keeps Your Bank Deposits Safe
March 16, 2023FDIC or NCUA coverage is available when you have money that you need soon or want to keep safe at your bank or credit union. But how do you know that your money is really safe?
FDIC & NCUA Insurance
Every person with accounts at any bank in the United States has their first $250,000 of deposits federally insured by the Federal Deposit Insurance Corporation (FDIC) if a bank and the National Credit Union Administration (NCUA) if a credit union. It can be even more than that, as different types of accounts for the same depositor get the $250,000 of coverage. So if you have accounts just in your name or where you are the sole beneficiary, those combine for up to $250,000 of FDIC insurance. You can also have joint accounts with a spouse, partner, or family member, and those accounts give you additional protection of up to $250,000 for your portion of those accounts. IRA accounts are also a separate category and have their own $250,000 worth of protection.
The easiest way to determine how much protection you have for your accounts at any given bank is to use the FDIC calculator or NCUA calculator for credit unions.
Over the Limit?
If you do find that you have more in one bank than the FDIC will insure, a best practice is to open additional accounts at another bank(s) as you get full coverage at each bank you have deposited at. Also, certain financial institutions offer FDIC insurance on cash reserve accounts up to a million. These institutions deposit cash reserves, up to $250,000 each, to up to 4 FDIC-insured program banks reducing the need for multiple accounts at multiple institutions. Check with your broker to see if your cash reserve is FDIC insured. Money market funds are not FDIC insured; money market accounts are insured.
Treasury Bills
Another alternative if you exceed FDIC or NCUA limits is to invest in federal Treasury bills (T-bill). Most people do this indirectly by purchasing a federal money market fund. Money market funds are not FDIC insured, but they may offer more protection than having excess, uninsured money in the bank in the extremely rare event of a bank failure. If you have $100,000 or more above your FDIC protection, you can also work with a financial advisor to purchase a portfolio of short-term Treasury bills. You can even do it yourself for less money – though it will take more time – by opening an account with Treasury Direct. Treasury bills are federally guaranteed as long as you hold them to maturity.
Still Nervous?
You may have specific concerns that are causing extra stress in your life. Your employer may offer a Financial Wellness benefit connecting you with a financial coach where you are able to discuss and work through your specific situation. Contact your employment benefits center today.