You’ve probably seen signs like “FDIC-insured” or “Member FDIC” on a bank’s wall or at the bottom of a bank’s website. The Federal Deposit Insurance Corporation (FDIC) provides insurance to almost all banks, including internet banks.
The FDIC is an independent government organization that safeguards deposits made by citizens at banks. The FDIC reimburses up to $250,000 per person, per account type, at each FDIC-insured bank in the event that the bank fails.
In reaction to the upheaval caused by the 1929 stock market crisis, the FDIC was established in 1933. They hurried to withdraw their money from banks after the catastrophe. These bank runs caused up to 9,000 banks to fail and the loss of $7 billion in deposits, wiping out the life savings of millions of Americans.
To reestablish confidence in the US financial sector, President Franklin D. Roosevelt signed the Banking Act of 1933, creating the FDIC. Since then, no one has experienced a loss of FDIC-insured funds as a result of a bank failure. Although the FDIC’s main responsibility is to guarantee deposits at US banks, it also has a number of other responsibilities.
Ins and Outs of the FDIC
Their responsibilities include managing bank assets and debts in the event of a failure and monitoring banks’ adherence to consumer protection legislation. The FDIC is not financed by funds authorized by Congress. Instead, it is financed by premiums, much like the majority of insurance firms.
In exchange for the FDIC protecting the money they store, banks and other savings institutions pay the FDIC premiums. If a bank collapses, the premiums enable the FDIC to compensate consumers. Your deposit money is insured simply by opening an eligible account at a bank that is a member of the FDIC.
While almost all banks are FDIC-insured, you can use Bank Find to double-check. But deposits at credit unions are not covered by the FDIC. Typically, the National Credit Union Administration (NCUA), which functions similarly, insures those accounts.
Deposits and interest payments made by customers into certain sorts of accounts, such as savings accounts, escrow accounts, accounts for money market deposits, deposit certificates (CDs), money orders, cashier’s checks, and other official documents that a bank orders