I keep seeing misinformation about FDIC in forums. Earlier this month I posted about the FDIC's article on the Top 10 FDIC Misconceptions. The top 2 FDIC misconceptions that I've encountered include: 1) You do not get the interest earned, only the principal when a bank fails, and 2) It may take years before they release all your funds.
If you keep below the insured limits, neither of these are true. Here's what that FDIC article states:
Federal law requires the FDIC to pay 100 percent of the insured deposits up to the federal limit - including principal and interest.
Federal law requires the FDIC to pay the insured deposits "as soon as possible" after an insured bank fails. Historically, the FDIC pays insured deposits within a few days after a bank closes, usually the next business day. In most cases, the FDIC will provide each depositor with a new account at another insured bank. Or, if arrangements cannot be made with another institution, the FDIC will issue a check to each depositor.
There are also a lot of misconceptions concerning the NCUA which is similar to the FDIC but for credit unions. The NCUA has made their insurance very similar to what FDIC offers. One common misconception about NCUA is that it doesn't have the same features regarding revocable trusts or POD accounts which allow you to go beyond the $100K coverage limit. Here's what the NCUA states:
Additional coverage is available on revocable trust or payable on death accounts. You can now name a parent or sibling as a beneficiary to get separate coverage. Previously, beneficiaries had to be a spouse, child or grandchild.
So for example, if you have an account at a credit union that's POD to one brother and another account that's POD to another brother, your total insurance can be increased to $200K.
- FDIC Insurance Overview
- FDIC EDIE (Electronic Deposit Insurance Estimator) Online Calculator
- Is the bank FDIC insured?
- FDIC Deposit Insurance FAQs