Three Things To Know To Protect Your Money While You Think It Is Safe In The Bank

I don’t usually write about current news items but this is too important to not discuss. For the first time in many decades multiple banks are failing in the United States and that has started to put the fear of losing everything that you have in some people. I know it does me.

I was reading an article in The Washington Times about how the damage bank failures are putting on the FDIC Reserve Fund (may erase as much as 17 percent of a U.S. government insurance fund) is going to lead to higher insurance premiums for banks. When you read a story like that you might start to get a little nervous. That’s what makes it extremely important for you to know what is and is not covered by the FDIC in the event that your bank fails.

Number One: Make sure that your bank is FDIC insured. Almost all banks that I have ever been to are FDIC insured. I’m sure that there are some out there that aren’t, but what are you doing in a bank like that? You can do this by visiting the FDIC website or by calling them at 1-877-ASK-FDIC. If you are worried about your bank’s solvency the FDIC maintains a watch list of potentially troubled banks, but they won’t share it. Services like Veribanc will rate your bank for a fee. Why this isn’t public knowledge baffles me.

Number Two: You must know what is and is not covered by FDIC insurance. The only assets that are covered are cash and cash equivalents. So, CDs, money market accounts, checking and savings accounts will be covered up to $100,000. What is MORE IMPORTANT is……

NOT COVERED: Money market mutual funds, or any mutual funds, for that matter. Neither are stocks, bonds, annuities or life insurance investments. Many people don’t realize this, but safe-deposit boxes are not covered either. That blows my mind and is something that I wouldn’t have thought about. Why is that? It literally means that you won’t be able to get to your safe deposit box if the bank fails. You may want to check with your homeowner’s insurance company to see if they cover your safe-deposit box contents.

Number 3: Know your FDIC coverage limits. Cash and cash equivalents are covered up to $100,000 per account. That means, you can have an account in your name covered up to $100,000, an account in your spouse’s name covered up to $100,000, and a joint account between you and your spouse covered up to $100,000 per person. If you have an account with beneficiaries named, then each beneficiary will be covered up to $100,000. Tax deferred retirement accounts are the one exception to the $100,000 rule. CDs, 401(k)s and simplified employee retirement plans are insured up to $250,000 if they are part of an IRA..

What happens if your bank fails?

You shouldn’t have any problems. From what I’ve read you generally don’t have to fill out any paperwork to get access to your account, although access to your money may be restricted for a few days. The FDIC frequently steps in and takes over banks on Fridays so they have the weekend to sort through as much of what they have to do as possible.

If you have a loan from a failed bank, you should keep making your payments. Make them on time, and unless you hear from the FDIC, send them to the same address you’ve always sent them. Scammers try to take advantage of people’s confusion and worry when a bank fails, so be on the lookout for SPAM emails and phone calls from unknown phone solicitors.

The one good thing to know is that while any money you have in CDs or a savings account will continue to earn interest, the FDIC does have the right to change the interest rate that you are earning. So I guess some interest is always better than no interest.

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This entry was posted on Thursday, August 14th, 2008 at 10:27 am and is filed under forex, Main, newsletter, Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.