Nothing quite rattles the nerves like the drama of bank failure, eh? I mean, news of Silicon Valley Bank closing its doors faster than a clam sensing danger, only to be followed by Signature Bank’s own implosion–it’s like a bad banking-themed nightmare! Now, I bet you’re nervously eyeing your own pile of green, wondering if you’d wake up one day to your bank pulling the rug from under your feet.
Yeah… about that. Turns out Uncle Sam ain’t watching by idly. They’ve reassured that depositors of both collapsed banks will get their funds back—in full. And, mind you, this isn’t just a soothing pat on the back for those under the standard Federal Deposit Insurance Corporation (FDIC) coverage limit. But hold your horses, it’s not always peaches and cream when banks go belly up.
Usually, a bank’s demise has the FDIC swooping in like a financial white knight to arrange for a sound fellow bank to adopt the failed bank’s financial children–its assets. But hey, even knights sometimes fail to find a maiden fair (or, in this instance, a willing buyer). If such a thing happens, customers with a hefty balance that goes beyond the insured maximum might just find themselves in a pickle. But before you start panicking faster than a cat on a hot tin roof, remember that such a scenario’s as rare as hen’s teeth—it’s only occurred once in the last 10 years with a small Connecticut bank biting the dust.
Since this ain’t your typical bedtime story, there’s no need to lose sleep over this banking debacle. The smart thing to do is to make sure your bank balance is as safe as houses. Interestingly enough, this isn’t rocket science, even for folks with the sizable stash of cash.
Keeping a Weather Eye on the FDIC Coverage
So, how does one ensure their treasure chest is FDIC-insured? As per the FDIC itself, there are three hassle-free ways to get a clear picture: checking out the FDIC’s Bank Find tool online, giving the FDIC a quick call at 1-877-275-3342, or simply looking for the official FDIC signage while visiting your local bank–you know, the good ol’ brick and mortar one?
But remember, just because your deposits are under the FDIC’s protective umbrella doesn’t mean every single penny you have is covered. You should be in the know of which of your financial vessels sail under this insurance. The good news is that the protective umbrella usually covers checking, savings, and certificates of deposit (CDs) accounts. But investments? Boy, those are a whole other kettle of fish and don’t fall under the FDIC insurance.
Don’t Break the FDIC’s $250,000 Breaking Point
Turns out, an average U.S. household in 2019 parked around $41,600 in transaction accounts. This means most American bank balances are nestled safely under the FDIC´s snug blanket of $250,000.
However, for folks with more than a quarter of a million in the bank, it can be a bit of a juggling act. But hey, don’t fret! Here are a few tricks of the trade to ensure all your pennies remain guarded:
- Multiply Your Fort: Spread your wealth across multiple FDIC-insured banks to maximize your total coverage. Just don’t confuse different branches of the same bank for different banks!
- Joint and Several: A joint account with your spouse can double the coverage limit to $500,000, as long as you meet certain conditions.
- Play the Field: Diversify funds across different ownership categories (individual, joint, retirement, trust accounts) at the same bank and increase your coverage.
Invest Wisely… In Information
Want to stay a notch above the rest when it comes to personal finance? Check out these resources: