The money you put in a bank account is insured by the Federal Deposit Insurance Corporation (FDIC), an independent agency of the U.S. government. There's comparable protection for most credit union deposits from the National Credit Union Share Insurance Fund. With this protection, your deposits are secure up to the maximum coverage that Congress has approved, even if your bank or credit union goes out of business. This coverage applies separately to each bank where you have accounts.
The exact amount of insurance at each bank depends on two factors—the kinds of accounts you have and the way those accounts are registered:
- Single accounts: Your total deposits in all the checking and savings accounts you own solely in your own name are currently insured up to $250,000.
- Joint accounts: Your total share of all the checking and savings accounts you own jointly with others is currently insured up to $250,000.
- Self-directed retirement accounts (such as IRAs): The aggregate balances in deposit accounts owned by one person and titled in the name of the person’s retirement plans are insured up to $250,000.
- Revocable trust accounts (including payable-on-death accounts and living trust accounts): Each account that names a different beneficiary is insured up to $250,000.
Let's assume, for example, that you had the following accounts at one bank:
- $5,000 in a checking account plus $245,000 in various savings accounts held in your name
- $200,000 in a savings account that you own jointly with another person
- $250,000 in certificates of deposit in an IRA
- $200,000 in two payable-on-death account with different beneficiaries
According to the FDIC insurance rules, all of those deposits would be insured fully by the FDIC since each account is within limits of the coverage. In the case of the joint savings account, the insurance coverage would be shared by your co-owner, with each of you being eligible for $250,000 insurance.
Suppose, however that the only money you had in a particular bank was a certificate of deposit valued at $300,000, and you were the sole owner. In that case, $250,000 of that amount would be covered, and $50,000 would be uninsured.
What FDIC Insurance Doesn't Cover
In addition to checking and savings accounts, your local bank may offer you investment accounts that you can use to save for college or retirement, insurance coverage for your home or your life, or annuities to help you generate retirement income. But it's important to remember that just because you're buying these products from a bank doesn't mean they're FDIC insured. In fact, they're not.
However, you may find that the convenience of having all of your financial activities under one roof makes your life easier. And if you already have a relationship with a particular bank, you may feel more comfortable going there for a broader range of financial services. In fact, some banks now employ investment professionals, as well as tellers and account managers to help you coordinate your whole financial strategy. If you are unsure about which accounts are insured and for how much, be sure to ask.
In contrast to these bank products, securities investments such as stocks, bonds, and the mutual funds that invest in them are not insured or guaranteed by the FDIC. They could lose value even if you hold them in an account, such as an IRA, that you open with your bank. That's true even if the bank's name is used in the name of investment, such as Bank X Growth Stock Fund. Insurance company products that a bank sells, including life insurance and annuities, aren't covered by the FDIC either.