What is the FDIC? Your money may not be safe in your bank

If you're new here, you may want to subscribe to my RSS feed. I promise to write things that will help. Thanks for visiting!

For the many of you who do not have more than 100,000 dollars in a bank account, this may not apply to you however for the few who do or will have because of frugal savings or just really prudent investing, you need to know the laws that protect your money.

The FDIC is the federal deposit insurance corporation which was created due to issues with banking during the great depression. People lost a lot of confidence in banks when banks went under. However, the banking system is essential to the economy as the flow of money is the driving force for a capitalist society. Banks work by taking in money from the people who save their money and lending them to the people who borrow money. Its a lot more complicated than this but basically if the flow of money is stopped b/c people lose confidence in banks, the entire system falls apart.

The FDIC insures your money up to 100,000 dollars. There are basically 2 ways that the FDIC pays your money back to you if the bank you deposited your money goes under. They send you a check after all the assets of the bank is sold or another bank takes over your account.

Why should you worry? Because the last time banks went under was not a century ago, it actually occurs every year. The biggest event being the savings and loans crisis in the 80s and 90s where a lot of big banks got in trouble.

What items are you insured? A checking account, money market deposit accounts, savings accounts, certificates of deposit, cashiers checks, interest checks. Note that money market funds are not insured. IRA are insured up to 250K. Remember that if you have a checking account and a savings account it is separately insured up to 100K. A joint account is considered another separate account so that too is insured. So you could have 300K in the bank and it could all be insured.

check out FDIC website for more information.
You can check if you bank is FDIC insured here.

Popularity: 20% [?]