The banking crisis which includes the bankruptcy of many banks across the landscape has led consumers to wonder are their savings safe? Will the Federal Deposits Insurance Corporation (FDIC) protect my saving account? What is covered and what isn’t covered under the FDIC?
There is lot of confusion among Americans regarding these questions which is understandable in this confusing economic environment. I hope to clear up some of the confusion regarding this important issue.
The Wall Market crashes and bank bankruptcies have unhinged many Americans about the safety of their savings accounts and personal finances. Many people now believe that it is safer to put money under the mattress.
It is a scary situation that the Federal Reserve, the government, and Wall Street investment banks and hedge funds have placed us in. The main culprit being the FED, who under Alan Greenspan unleashed the current economic tsunami with the ultra low interest rates that led to the housing bubble.
The American people feel powerless and see themselves as mere spectators of a calamity unfolding in front of them. They want to protect their assets and one the most important assets they want to protect are their savings. Herein, the FDIC comes into the equation as it insures deposits.
What is the FDIC?
The Federal Deposit Insurance Corporation is a federal government corporation formed by the Glass-Steagall Act of 1933. It offers deposit insurance which guarantees the protection of checking and savings accounts in member banks, up to $250,000 per depositor per bank.
Under the FDIC insurance rules, each bank savings account or checking account at different banks are insured separately. For example, if you have a checking account at Bank A and a savings account at Bank B with $250,000 in each account, you are protected for the total of $500,000.
Accounts with various ownership designations, such as joint accounts, trusts, and beneficial ownership are considered separately for the $250,000 insurance limit. Additionally, the amount of insurance safety for an Individual Retirement Account is $250,000.
What the FDIC Protects?
The most common form of cash deposit accounts maintained by banks are insured by the FDIC, such as savings, checking, certificates of deposit (CDs), trusts, and IRA retirement accounts. Banks also offer money market accounts which earn interest rates set by the banking institution are generally insured by the FDIC up to the $250,000 limit.”
What Is FDIC Doesn’t Protect?
In recent years more and more consumers are increasingly choosing to place monies in investment products that are not deposits, such as stocks, bonds, annuities, mutual funds, life insurance policies. Unlike the traditional savings account or other deposits, these non-deposit investments are not insured by the FDIC.
Securities Investor Protection Corporation
Securities that you own that are held in a brokerage account are not insured against loss in value. The investment value can go up or down depending on market conditions. The Securities Investors Protection Corporation (SIPC) is a non government entity which restores missing stocks and other securities in client accounts held by its member brokerage firms up to $500,000, including up to $100,000 in cash, only if the member firm fails.
Savings Accounts – includes passbook accounts
Checking Accounts – includes money market deposit accounts
Certificates of Deposit (CDs)
Mutual funds (bond, stock, or money market mutual funds)
Exchange Traded Funds (ETFs)
Stocks, Treasury securities, bonds
Other investment products/securities
Safe deposit boxes
I hope this information clarifies the status of your savings account and other investment accounts.