Last week there were seven bank failures and one credit union failure. With failures on the rise, it's important to confirm that your deposits are 100% federally insured. I've posted on many of these issues before, but there have been several website changes at both fdic.gov and ncua.gov. So I thought it would be useful for a new post with updated links and some updated info.
- FDIC & NCUA: The Federal Deposit Insurance Corporation (FDIC) covers deposits at banks and savings associations. The National Credit Union Administration (NCUA) covers credit unions. The NCUA and the FDIC are both independent federal agencies backed by the full faith and credit of the U.S. government. Both provide deposit insurance that's very similar.
- Standard deposit insurance coverage limit is currently $250,000. However, this is scheduled to return to $100,000 after December 31, 2013 at both banks and credit unions. There's one exception. This standard limit will continue on IRAs after 2013. This $250K limit was made permanent for IRAs before the financial crisis.
- Insuring over the standard deposit limit: You can be fully insured if you have more than $250,000 at one bank. However, you have to be very careful. As described at this FDIC page: "The FDIC provides separate coverage for deposits held in different account ownership categories. Depositors may qualify for more coverage if they have funds in different ownership categories and all FDIC requirements are met." Note, the last sentence that states "all FDIC requirements are met." Don't assume your bank will meet these requirements.
- Confirming that your deposits are fully insured: Both the FDIC and the NCUA provide easy-to-use deposit insurance estimators: FDIC's Deposit Insurance Estimator and NCUA's Share Insurance Estimator. These tools are especially important to use if you plan to go over the standard deposit limit.
- Not all banks and credit unions are federally insured: This is more common with credit unions. Several states allow credit unions to use private deposit insurance. Credit unions without "Federal" in their names that are in one of these states may only be privately insured. The American Share Insurance (ASI) is the main private deposit insurer. The only banks in the U.S. that I've seen that are not FDIC-insured are foreign banks with branches in the U.S. You can confirm the federal insurance status of an institution at the FDIC and NCUA websites: FDIC Bank Find Tool and NCUA Find a Credit Union Tool. Not only will these tools confirm the federal insurance status, but you can confirm the physical and web address of the institution.