What’s the FDIC?

The world financial crisis has dried up the credit market, caused money giants like Lehman Brothers to crash, and forced gigantic banks to combine, making many folks wonder where their money will be safe. Through the FDIC or the Federal Deposit Insurance Corporation the bank is still the best place to keep your money regardless of what occurs to your bank. In October 2008 the deposit insurance was briefly raised to $250,000 per depositor thru December 31, 2009, so if your area bank falls down you can still be guaranteed your deposit up to $250,000.

FDIC 101

Established in 1933, the FDIC was made to guarantee public confidence in the banking system. This worked by providing all depositors in FDIC-insured banks coverage up to $5,000 ( in the thirty’s ), and second by taking over for a failed bank to gather and sell the bank’s assets to settle the bank’s debt including claims for deposits above the insured amount. The FDIC receives its funding from premiums paid by insured banks as well as revenues from its investments in US Treasury securities; no federal or state taxes are used.

When are you safe?

To use the full protection the FDIC offers, there are two things to keep in mind. First FDIC coverage does not extend to all financial firms so ask your bank if they are covered or check the FDIC site to see if you bank is listed. Second coverage is for individual deposit accounts only up to $250,000 so no stocks, bonds, safety deposit boxes, hedge funds, and so on.

Beyond the $250,000 Coverage

For coverage beyond the $250,000 there are some specific examples like creating deposits under different ownership categories where excess coverage is allowed. Revocable Trust Accounts, or a deposit account opened by a person with the stated goal of the account being turned over to a number of beneficiaries on the demise of the original account holder, can get over $250,000. For instance if Mr. Jones has a deposit account worth $500,000, both his children would get $250,000 each if they were the beneficiaries named on the account.

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