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What Is the FDIC and How Does It Work?


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Question: What Is the FDIC and How Does It Work?

The Federal Deposit Insurance Corporation (FDIC) was set up as a response to the number of bank failures during the Great Depression in the 1930s. It is an agency that is backed by the government and insures the money that you have deposited in your bank in the event that the bank fails. If you are a member of a credit union you will receive similar coverage through the National Credit Union Administration (NCUA). It is important to check to make sure that your bank or credit union is a member of one of these associations so that your money is protected.


It is important to fully understand the FDIC guidelines so that you can take advantage of them. The FDIC will only guarantee the first $250,00 dollars in your account. The accounts that are insured are deposit accounts such as checking accounts, savings accounts, money market savings accounts, IRAs, and CDs. They do not insure any investing accounts that you may have through the bank, such as mutual funds, annuities, stocks and bonds.

If you have three accounts are in your name only at a bank, and the total is more than $250,000, then only the first $250,000 is guaranteed. It is important to understand how this works so you can protect yourself. If you have more money than this you should consider opening accounts at different banks (not different branches of the same bank) to protect your money.

If you have joint ownership of an account and an individual account you may qualify for more insurance. For example if you have an account that you are the sole owner of and a joint account with your spouse, each of these accounts will be looked at separately to receive the FDIC guarantee. Additionally if your spouse has an individual account as well, then that money would also be insured. You can ask a customer service representative to help you determine the amount of insurance you would qualify for with your specific accounts.

If your bank were to fail you would need to contact the FDIC to find out how to receive your money. The FDIC is not required to give notice before shutting down a bank, but does post contact information, so that you can know the steps you need to take to get your money back. You can call them at 877-ASKFDIC or at www.fdic.gov.


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