Protect Your Cash With This Crucial Bank Feature

It's a scary world out there, and if you're worried about your finances, you're definitely not alone. Thankfully, if you've got money in the bank, the odds are good that it is being kept safe from loss by the Federal Deposit Insurance Corporation (FDIC). Here's a closer look at this important agency, what it does, and why you must bank with an institution that partners with it.

What is the Federal Deposit Insurance Corporation?

You've probably seen or heard the phrase "FDIC insured" before. The FDIC is an independent agency of the federal government that was created as part of the Banking Act of 1933. It was meant to ensure that Americans could trust their banks to keep their money safe and available when they needed it. It was spurred by the numerous runs on banks and subsequent bank failures in the wake of the 1929 stock market crash and resulting Great Depression.

In the event of a bank failure, the FDIC steps in to act as "receiver" of the bank's assets, and works to return money to customers and settle the bank's debts. In fact, it's had to do this fairly recently -- there were a few big-name bank failures in 2023. This included the collapse of Silicon Valley Bank, which was the largest to fail since the 2008 financial crisis. Customers had their money returned to them within a few days of the failure.

Which types of bank accounts are insured?

The FDIC does not insure your money in retirement or other investment accounts, annuities, or life insurance policies. But it does cover your money in:

• Checking accounts
• Savings accounts
• Money market accounts
• Certificates of deposit (CDs)
• Negotiable Order of Withdrawal (NOW) accounts
• Other official bank items like money orders and cashier's checks

How much protection do you get?

The limit for FDIC insurance has grown over the years, from an initial limit of $2,500 on Jan. 1, 1934 (it was doubled to $5,000 just six months later), up to $250,000 today. This limit is per depositor, per FDIC-insured bank, and per ownership category; if you have less than $250,000 in a savings account owned solely by you, it's completely protected. But if you have a joint account you own with another person, and it has a balance of $500,000, all that money is insured, too.

If you have a lot of money in bank accounts, it's a good idea to spread it out to ensure all of it is safe. If your savings account balance stands at $300,000, you might consider splitting that between two banks, for example. Some financial institutions offer even higher FDIC limits -- if your account balance is bumping up against the default $250,000 limit, you might consider exploring your options with one of these banks.

How can you tell if your bank is protected by the FDIC?

Thankfully, it's not hard to find out if your bank falls under FDIC protection. (If you bank with a credit union, they have their own insurance protection under the National Credit Union Administration, or NCUA.) Head over to your bank's website, or visit a branch, and you're likely to see the FDIC logo displayed prominently somewhere.

If you don't, you can go to the FDIC's BankFind Suite, plug in your bank's name, and search. This will tell you if your money is insured in accounts you have with that institution. As of this writing, the FDIC insures 4,586 financial institutions.

In these uncertain times, it might help you sleep better at night to know that in the event of a bank failure, your money won't just evaporate. Before you open an account with a new-to-you bank, it's worth taking the time to check its FDIC bona fides.