What is the Federal Deposit Insurance Corporation (FDIC)?
FDIC is an independent government organization that insures U.S. bank and thrift deposits in the event of failure. To promote solid banking operations and sustain public trust and financial stability, the FDIC was founded in 1933.
For member firms, the Federal Deposit Insurance Corporation (FDIC) protects deposits up to $250,000 per depositor starting in 2023. Consumers must verify FDIC insurance.
The FDIC aims to prevent “run-on-the-bank” scenarios, which destroyed numerous banks during the Great Depression. In those years, small groups of frightened clients raced to withdraw their money when a bank threatened closure.
After the panic, a swarm of consumers tried to withdraw, leaving banks unable to comply. The first to withdraw money from a struggling bank would gain, while others who waited risked losing their savings overnight. Before the FDIC, deposit protection depended on bank soundness.
A comprehension of the Federal Deposit Insurance Corporation (FDIC)
Most banks and thrifts now provide FDIC coverage, reducing deposit uncertainty for consumers. Thus, banks may handle issues without a run.
If a bank fails, the FDIC guarantees deposits of up to $250,000 per FDIC-insured bank for each account ownership type, including retirement and trusts. This number is sufficient for most depositors, but those with more should distribute their assets among numerous institutions.
First example:
A $200,000 savings account and a $100,000 CD leave $50,000 uninsured.
Second example:
If a couple owns $500,000 in a joint account and $250,000 in an eligible retirement account, the FDIC will cover all $750,000 because each co-owner’s portion is protected and the retirement account is distinct.
A handy interactive tool from the FDIC checks asset coverage.
Making a claim
The FDIC allows customers to make claims the day after a bank or thrift fails. Online requests are accepted on the FDIC website. Bank clients can get free individualized help by contacting 877-275-3342 (1-877-ASKFDIC).
Bank failures are the FDIC’s sole insurance. Banks address fraud, theft, and other losses. The FDIC cannot regulate identity theft.
Special Considerations
Unlike bank deposits, the National Credit Union Share Insurance Fund insures credit union deposits. The NCUA-regulated fund covers individual accounts up to $250,000.
What does the FDIC mean?
The Federal Deposit Insurance Corp. insures bank deposits.
Why was the Federal Deposit Insurance Corporation (FDIC) founded?
During the Great Depression in the late 1920s and early 1930s, “run-on-the-bank” scenarios destroyed several banks. The FDIC’s principal goal is to avoid them.
Are my stocks and mutual funds FDIC-protected?
Not FDIC-insured: mutual funds, stocks, annuities, life insurance, bonds
Bottom Line
FDIC insures U.S. bank and thrift deposits in the event of failure or run. It was aimed at promoting consumer confidence and financial stability during the Depression. The organization covers member business deposits up to $250,000 per depositor. Check a bank’s FDIC insurance before opening an account or depositing.
Conclusion
- FDIC is an independent government organization that insures U.S. bank and thrift deposits in the event of failure.
- The FDIC insures deposits up to $250,000 per depositor for member firms.
- The FDIC insures checking, savings, CDs, money market, IRAs, revocable and irrevocable trust accounts, and employee benefit programs.
- The FDIC doesn’t cover mutual funds, annuities, life insurance, stocks, or bonds.
