October 7, 2008

The FDIC And Your Money

In these troubled economic times, everyone seems to be worried about their money. Even savings accounts have suffered pullouts by frightened investors. While hiding your money under your mattress or in a jar atop the fridge might seem like the only way to avoid any uncertainty, you should know that your savings accounts (among others) have some special protections in place.

The Federal Deposit Insurance Corporation, or FDIC, is responsible for insuring deposits at banks of all sizes across the country. If you have ever seen the "member FDIC" sign on the front of a bank, or placed on their website, you know that bank's deposits are covered. Specifically, the FDIC insures checking accounts, savings accounts, CDs, trust accounts, and IRAs. If your bank offers a money market deposit account, the FDIC will insure that also. Until recently, all these accounts were insured up to amounts of $100,000 ($250,000 for IRAs). With the passage of last week's bailout, the Emergency Economic Stabilization Act, that limit was raised to $250,000 for all insured account types -- but only until December 31, 2009. Also, that coverage is $250,000 per depositor per bank -- meaning if you want to keep more than $250,000 in one of the above named account types, you can open the same type of account at another bank, deposit your additional money, and have up to $250,000 of coverage at that bank.

So what exactly does the insurance cover? In the event that your bank should fail, the FDIC guarantees that you will get every cent of money back that you've deposited in a covered account. According to their website, since the agency's creation in 1933, no depositor has ever lost any money from an insured deposit. You can look through their website information for more details and answers to specific questions -- it's really easy to use.

What does this mean for you? Whatever happens to your bank, if it is an FDIC member, your money is in a covered account type and within the coverage limits, your cash will be safe. Don't break out that empty mayonnaise jar just yet.

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