FDIC Approves Fee Hike. Will It Impact Your Savings?

A string of recent bank failures has left many consumers with money in savings on edge. And it's left many experts wondering whether the current FDIC insurance cap is really enough to protect consumers.

Right now, depositors are protected for up to $250,000 per banking institution. Joint depositors at the same bank can double that limit to $500,000. 

But FDIC insurance comes at a cost -- to banks, that is. And now, the FDIC board has approved a proposal to increase the fees banks pay to put that protection for consumers in place.

Your bank could start paying more 

The FDIC recently had to pay out $15.8 billion to make consumers whole after Silicon Valley Bank and Signature Bank collapsed earlier this year. To compensate, the FDIC has proposed having banks that have more than $5 billion in uninsured deposits pay a higher fee for FDIC insurance.

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The proposal seeks to charge banks 0.125% a year for two years on all uninsured deposits beyond the $5 billion mark. JPMorgan Chase, the largest bank in the U.S., would pay about $1.5 billion in added fees as part of this proposal. All told, an estimated 113 banks would be subject to the new rules.

You might pay more, too

The FDIC expects its new rules to take effect at the start of 2024. But as a consumer, you might see your banking costs increase before then.

To be clear, it's banks that pay for FDIC insurance, not individual consumers. But as someone who uses a bank, you might be paying the FDIC's added fees indirectly in the form of higher banking fees -- things like overdraft charges, inactivity fees, and fees for not meeting a minimum balance requirement. 

Banks might also go to other measures to recoup some of the money they'll soon have to shell out. You may find that you're not looking at as competitive an interest rate on your savings account. Or, you may find that it takes longer to reach a customer service representative as banks conserve costs by cutting headcount.

To be clear, we don't know what steps banks will take to make up for the higher fees they're looking at. But consumers should expect to be impacted in some way. 

Will the $250,000 FDIC insurance limit be increased?

That proposal is still in the works. But if that limit does increase, there's a good chance consumers will wind up paying for it indirectly as well. Of course, in exchange, consumers with larger amounts of money in savings will get added protection, so there's that upside. 

For now, though, consumers with more than $250,000 in cash can protect themselves by simply spreading out their money across multiple FDIC-insured banks. Thankfully, that $250,000 limit renews, so to speak, once you bank at a new institution. So if you've maxed out your FDIC insurance by depositing $250,000 at one bank but have another $100,000 in cash, you can protect it by putting it in a different bank that's FDIC-insured as well.