Are CDs FDIC Insured?

The failures of five banks in 2023 marked an infamous milestone: These collapsed banks held nearly $549 billion in combined assets, the largest total in a single year.

The recent failures are reminders of the importance of federal deposit insurance. It protects bank or credit union customers if an insured institution fails and comes automatically with any deposit account opened at a federally insured bank or credit union.

The Federal Deposit Insurance Corp. (FDIC) insures banks, while the National Credit Union Administration (NCUA) insures credit unions. The FDIC insures up to $250,000 per depositor, per FDIC-insured bank, per ownership category. It covers certain products, including certificates of deposit (CDs).

The NCUA provides the same coverage and insures share certificates — the credit union version of CDs.

Here’s more about deposit insurance for CDs to help you understand coverage and maximize it.

Are CDs FDIC insured?

A CD is generally a safe place to deposit your money. Your CD will typically be protected by deposit insurance from the FDIC or NCUA, meaning principal and any accrued interest through the date of the institution’s closure will be returned to you.

You’ll want to verify that a financial institution is federally insured before opening a CD. Find FDIC-insured banks by using the BankFind Suite online tool, calling the FDIC at 877-275-3342 or checking for FDIC signage where deposits are received.

For credit unions, visit the NCUA’s Credit Union Locator tool, or check for official NCUA insurance signage at a credit union or on a credit union website.

How does FDIC insurance work?

FDIC insurance protects your money in deposit accounts should an FDIC-insured bank fail. Since the FDIC’s founding in 1933, no depositor has lost a dime of FDIC-insured funds.

FDIC insurance covers not only CDs but also other deposit products, such as checking accounts, savings accounts and money market accounts.

If you purchase a CD at an FDIC-insured bank where you already have deposits, make sure that your funds stay under the insurance limit. You may need to take steps to fully protect your deposits if adding a CD pushes you over the $250,000 limit. You can contact the FDIC at 877-275-3342 and speak with a deposit insurance specialist for help making sure every dollar is covered.

How do you get more FDIC insurance?

If you plan to open a large CD, you may exceed the FDIC insurance limit. You’ll want to keep track of your deposit accounts to make sure the total amount at any one bank stays under the limit.

If you need help with this task, try the FDIC’s Electronic Deposit Insurance Estimator Tool. It can be especially useful if you have accounts that fall under multiple ownership categories. An ownership category simply refers to who owns the account.

The FDIC insures deposits separately, according to their ownership categories and how the accounts are titled. This means you may qualify for more than $250,000 in insurance coverage at the same bank if your funds are deposited in different ownership categories and you meet the requirements for each category.

Here’s how the FDIC breaks down ownership categories:

• Single accounts are owned by one person, without named beneficiaries, and covered up to $250,000.
• Certain retirement accounts, such as individual retirement accounts (IRAs) and 401(k)s owned by the same person at the same bank, are insured up to $250,000.
• Joint accounts are owned by two or more people, without named beneficiaries, and each co-owner at the same bank is insured up to $250,000.
• Trust accounts held by one or more owners under either an informal revocable trust, formal revocable trust or irrevocable trust are insured for $250,000 for each eligible beneficiary, not to exceed five beneficiaries.
• Employee benefit plan accounts are insured on a pass-through basis up to $250,000 for the noncontingent interest of each plan participant.
• Corporation, partnership or unincorporated association accounts are insured $250,000 per legal entity.
• Government accounts owned by federal agencies, states, counties or municipalities are covered up to $250,000 (more may be available, subject to specific conditions).

You can use these categories to maximize your insurance coverage. Let’s say you have a single account and you share a joint account with your spouse. The single account gets up to $250,000 of coverage, and the joint account qualifies for $500,000 — $250,000 per co-owner. You end up with a limit of $750,000 for the two accounts.

The trust account ownership category alone can add up to $1.25 million in FDIC insurance coverage, depending on the number of eligible beneficiaries.

If using ownership categories to insure more than $250,000 seems confusing, an alternative is to spread your deposits among multiple federally insured institutions.

What CDs are not FDIC insured?

Not all CDs are insured by the FDIC. Here are a few types of CDs that do not have this protection.

Credit union CDs

Credit unions can have deposit insurance from the NCUA. However, the NCUA does not insure all credit unions.

A small minority of credit unions in just 10 states have private deposit insurance from American Share Insurance (ASI). Although ASI is a private insurer, it has a 50-year track record of protecting credit unions.

Brokered CDs

Brokered CDs almost always have FDIC insurance unless your broker buys your CD from an uninsured bank. The broker should disclose this information because it adds significant risk.

Foreign bank CDs

Many foreign-owned banks operate either branches or subsidiary banks inside the U.S. These bank branches and subsidiaries are typically FDIC insured and operate just like any other U.S.-based bank. CDs purchased from these FDIC-insured banks are essentially domestic bank CDs.

Foreign banks that operate outside the U.S. are not FDIC insured.

How safe are online CDs?

A CD with an online bank can be just as safe as one from a brick-and-mortar institution, though you will need to check that the online bank is federally insured.

You can also pause before opening a CD online to see what steps the bank takes to protect your personal information, such as use of encryption and multifactor authentication.

How do you get your money if your bank fails?

With most bank failures, depositors experience no interruptions in service or loss of access to their accounts. Typically, a healthy bank assumes the insured deposits of the failed bank, and depositors of the failed bank automatically become new depositors.

The FDIC’s insurance coverage includes principal and interest through the date of the bank failure up to the applicable insurance limit for each deposit.

If you have a CD at a failed bank, the new bank may continue the CD at the same interest rate until maturity. The new bank may also change your interest rate, including lowering it, or close your CD early without penalty.

A less common outcome for a bank failure is when the FDIC is unable to find another bank to assume the failed bank’s deposits. In this case, the FDIC mails checks to depositors of the total insured balance in each account.

Frequently asked questions

How do CDs work?

When you open a traditional CD, you fund the account with an initial deposit and earn interest at a fixed rate for a set period ranging from three months to five years. CD rates are typically higher than rates on savings accounts because you agree to leave your money in the bank for a specific term or often pay a penalty.

Does the FDIC protect CDs from identity theft and fraud?

FDIC deposit insurance only protects CDs from bank failure. Federal regulations, however, limit your liability for losses on your bank account caused by certain forms of fraud. You’re responsible for notifying the bank of unauthorized withdrawal in a timely fashion.