You’ve probably seen a sign that reads “FDIC-insured” or “Member FDIC” on a bank’s wall or at the bottom of the homepage of a bank’s website. The Federal Deposit Insurance Corporation (FDIC) provides deposit insurance to almost all banks, including internet banks.
Money that customers deposit at a bank is insured by the FDIC, an independent government organization. In the event that an FDIC-insured bank fails, the FDIC will reimburse up to $250,000 per individual for each kind of account.
People 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 away the life savings of millions of Americans.
To reestablish confidence in the US financial sector, President Franklin D. Roosevelt signed the Financial 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, according to the FDIC.
Protecting Your Assets
Although the FDIC’s main responsibility is to guarantee deposits at US banks, it also has a number of additional responsibilities. These responsibilities include managing bank assets and obligations in the event of a failure and monitoring banks’ adherence to consumer protection legislation.
The FDIC is not financed by funds authorized by Congress. Like the bulk of insurance companies, it is funded instead via premiums.
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 funds are insured simply by opening an eligible account at a bank that is a member of the FDIC. Although almost all banks are FDIC-insured, you can utilize the FDIC’s Bank Find to double-check. However, deposits made at credit unions are not covered by the FDIC. These accounts are often insured by the National Credit Union Administration (NCUA), which runs similarly.