Why Bank Failure is (Likely) Business as Usual for You

The thought of a bank failure is terrifying for many people. They think that when a bank goes under, it is devastating for the economy and for their accounts. However, in most cases, you may not even be affected by a bank going out of business. Here are a few things to consider about why a bank failure is likely business as usual for you.

FDIC Insured

If you have ever paid attention to the sign of your bank, there is a good chance that you saw something that said "FDIC Insured." The term FDIC stands for Federal Deposit Insurance Corporation. This is a government entity that insures all of the deposits in a chartered bank. If your bank goes out of business, the FDIC is going to step in and reimburse all of the account holders in the bank. This means that if your bank goes out of business, the money in your account is most likely going to be safe. Different ownership will take over the bank and continue running things as normal.

Limits

The only exception to this rule is if you have more money in your bank account than what the FDIC is going to cover. The long-standing limit for FDIC insurance is $100,000 per account. This means that if you have less than $100,000 in your account, you are never going to have to worry about the safety of your money. If you get above that total, then you are risking the amount of your money that is over $100,000. For example, if you had $300,000 in your account and your bank went out of business, the FDIC would step in and give you $100,000. You would then lose the other $200,000 that you had in your bank account. 

How to Avoid Problems

If you have more than $100,000 in cash, this does not necessarily mean that you cannot protect all of your money. In order to do so, you will simply need to get more than one bank account and work with more than one bank. According to the rules, you can only have $100,000 of insurance for each bank that you work with. Therefore, if you work with 10 different banks, you can have $1 million that is insured by the FDIC. The rules also state that each depositor is going to be insured separately. Therefore, if you want to put some of your money into an account in one of your family members names, this would also be insured.

Types of Accounts

This protection is also provided for many different types of accounts. If you have an account with a bank, there is a good chance that it is covered by the FDIC. Your savings accounts, checking accounts, CDs, and even certain types of retirement accounts are going to be covered by the FDIC insurance. As long as you are working with a chartered financial institution that has FDIC insurance, you should not have to worry about them going out of business.

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