When the pickings get slim are you exceeding the FDIC limit at institutions such as Chase, Bank of America, Navy Federal and the like or, to stay within FDIC limits, are you putting money at lesser known smaller financial institutions that are under $1 billion and have the equivalent of a C safety rating? This has been an ongoing issue but there seem to be fewer obvious choices. On one side if banks such as Chase or Bank of America have financial problems they could legally confiscate depositors' funds in excess of FDIC insurance to use as capital. But if Chase or Bank of America have those kinds of financial problems there's more to be concerned about other than personal deposits. However if staying within FDIC limits is still a priority do you take the risk with smaller institutions that have a mediocre safety rating? No one wants to deal with the FDIC if a bank failure arises. Additionally, the more your information is out there the greater the likelihood of security issues. How do you mimimize these issues? Where do you draw the line? Where is your comfort zone?
Answers
There is a point to be made - If TBTF banks fail there is more to be concerned with than your personal finances. You're also taking chances when you provide your personal info to numerous institutions, not to mention the headaches and time involved in managing many banks and credit unions. Maintaining longterm relationships with larger (and smaller) banks can prove beneficial. For these reasons and the perception that you have a greater chance of experiencing less than favorable situations with a smaller bank as opposed to a larger bank or credit union can influence your choice. It goes without saying that you are typically sacrificing substantial yield.
On the flip side as Ally and 49ers say --Why chance it? Some uninsured depositors (creditors) of failed institutions have been lucky thus far. However, unless I have missed something, which is possible, the ability of large financial institutions (including TBTF banks) to use uninsured depositors' money in recapitalization remains in place in 2025 through bail-ins and resolution plans. Although all measures will be used to find another bank or prevent depositor loss under a failed bank scenario, uninsured depositors may still face potential losses in the event of a large bank failure. Even if a bank can be resolved through asset sales uninsured depositors may not have 100% of their funds returned. Regulators would certainly try to minimize disruptions to the broader financial system, so they could decide to intervene and FDIC,or whoever, could decide to return all deposits (insured and uninsured) but they are not required to do so. The specifics of what FDIC may look like in the future is a hot topic of discussion.
Ultimately the potential for loss may or may not be mimimal but it does exist.
So why exceed FDIC or NCUA insurance unless you determine the covenience and perceived safety and security of any institution, large or small, is worth it?
Secondly, Countless businesses and lots of people exceed FDIC limits by far at the top 5 banks, such as Chase, BofA, Wells, etc., figuring they are too big too fail. It would often be impractical for businesses to spread out their cash at so many multiple banks in an effort to stay at FDIC limits. As was mentioned, if any of the 5 major banks were to fail where the countless amount of uninsured money were to be lost, it would have a devastating effect beyond just that bank failing, etc. Thus, I feel safe exceeding FDIC limits at the big banks.
It was not the gov who saved the last 3 banks that failed. Jamie Dimon and others made a deal that the top 10 banks and several others are paying extra premiums to pay the gov back for the money they would not cover and most of them got the deposits and loans from the 3 banks. And the deal was all of those banks would pay more FDIC insurance premiums until that the money was paid back.
What happens when there is no one to pay for the deposit and loans if something happens to the big banks? Don't feel to safe. Part of the deal was the 1,250,000 limit for insurance for banks that took affect last April 1, and will in a while be the same limit for credit unions.
Guess you haven't heard that the guy in DC say that he wants to renegotiate our debt and with the foreign countries to make the 30 years bonds into 50 yr bonds.
What is is until it isn't.
And with the way they implemented the last scam, you can't trust them not to lower the insurance limit again. So if you take out a CD, it could once again be partially uninsured before it matures through no fault of your own (except now you should know better than to trust the FDIC and NCUA).
And now I suspect the credit union industry will lose some large depositors as well for the same reason although many, such as myself have already cut back on my deposits there in anticipation that they would follow the FDIC down that same dirty road. If you have any certificates totaling over $1.25m at any NCUA credit union, with over roughly 18 months until maturity, with the understanding they were fully insured, now is the time to plan your strategy (actually it's late but the sooner the better) since if they pulled the same scam as the FDIC and didn't grandfather in your certificates they will become partially uninsured before they mature and you will be stuck either paying a penalty to get out or to take a risk without coverage in case of FI failure.
This is nothing new. People had nearly 3 years notice. Just like with the credit unions.
2. NCUA announced less than 2 years before it goes into effect.
3. FDIC provided ZERO direct notice to depositors who lost their insurance and failed to grandfather in depositors who relied on the assurance of coverage when they opened their CDs. I haven't looked at it yet but I'm willing to bet NCUA is in the process of pulling the exact same bait and switch scam.
You were not scammed. You don't pay attention to what you do with your money. Just throw it someplace and think you know what you are doing. The FDIC rules and changes and the NCUA limits and changes have been posted many times on this site. The NCUA and FDIC have most of the rules the same most of the time within a time limit. Always has been that way for many years. I made a post about the Sept 19th letter where it was approved by the board, but it had to have citizen comment before it went into the waiting period before it started to begin.
Guess you missed that also.
And of course you didn't happen to call the NCUA, you didn't read the posts, you don't even seem to know that the FDIC and NCUA are similar in rules and laws and policies.
But it the NCUA and FDIC fault because you didn't do your homework.
These government agencies are worse than useless. They are a scam. They're like the Mob. We can get away it because we make you an offer you can't refuse.
It doesn't matter if you give notice after someone has already made a commitment based on a promise of being insured then had the insurance rug pulled out from under them. That is a breach of promise and they have shown that they cannot be trusted.
If a bank did this exact same thing, you would be the first one posting a headline in this forum to smash them.
Breakdown of Maximum Coverage:
1. Single Account with POD Beneficiaries (Payable on Death)
Account type: Single account with 5 beneficiaries.
Coverage: The FDIC covers $250,000 per beneficiary.
So for 5 beneficiaries, coverage would be:
$250,000 x 5 beneficiaries = $1.25 million.
2. Single account, 1 owner, no beneficiaries
Account type: Single Account, no beneficiaries.
Coverage: $250,000
3. Joint Account (2 Co-owners)
Account type: Joint account with 2 co-owners (e.g., husband and wife).
Coverage: Each co-owner gets coverage up to $250,000 per co-owner.
So, for 2 co-owners, the coverage would be:
$250,000 x 2 co-owners = $500,000.
4. Joint Account with 5 Beneficiaries
Account type: Joint account with 2 co-owners and 5 beneficiaries.
Coverage: Each co-owner is covered $250,000 per beneficiary.
For each co-owner, with 5 beneficiaries, the coverage would be:
$250,000 x 5 beneficiaries = $1.25 million per co-owner.
Since there are 2 co-owners, total coverage would be:
$1.25 million x 2 co-owners = $2.5 million.
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Maxed-Out FDIC Coverage Example:
Here’s how it would look when combining all these accounts for the maximum FDIC coverage at the same bank:
Single Account with 5 POD Beneficiaries:
$1.25 million coverage.
Joint Account with 2 Co-owners:
$500,000 coverage.
Joint Account with 5 Beneficiaries:
$2.5 million coverage.
Single Account with No Beneficiaries:
$250,000 coverage.
Total Coverage:
$1.25 million + $500,000 + $2.5 million + $250,000 = $4.5 million.
FDIC Insurance Coverage Basics:
Single Accounts:
A single account is owned by one person.
The FDIC insures a single account up to $250,000 per depositor, per bank.
Joint Accounts:
A joint account is owned by two or more people.
Each co-owner’s share is insured up to $250,000. So if two people own a joint account, they can get $250,000 coverage each for their share of the account, totaling $500,000 for the account.
If there are more co-owners, the coverage can increase, as each co-owner’s share is separately insured.
POD (Payable on Death) Accounts:
A POD account is a type of account where the funds pass directly to beneficiaries upon the account holder’s death.
The FDIC treats POD accounts as separate accounts for each beneficiary.
$250,000 of coverage is provided for each beneficiary named in the POD account, but only if the beneficiary is a named individual, charity, or other qualifying entity.
So, in a single depositor’s POD account with 5 beneficiaries, the coverage would be $250,000 per beneficiary, totaling $1.25 million.
Combining Account Types for Increased Coverage:
FDIC coverage is determined separately for each type of account (individual, joint, POD) and by the number of beneficiaries.
You can combine different account types to maximize coverage. For example:
A single account with POD beneficiaries (coverage up to $1.25 million).
A joint account with 2 co-owners (coverage up to $500,000).
A joint account with POD beneficiaries (coverage up to $2.5 million for 2 co-owners with 5 beneficiaries).
A single account with no beneficiaries (coverage $250,000)
Legal Language for Coverage:
The FDIC rule often uses language like this:
"Each depositor’s insured deposits are covered to a maximum of $250,000 per depositor, per insured bank, for each of the following categories of ownership."
"A joint account is insured up to $250,000 per co-owner for each co-owner's interest."
"A POD account is insured based on the number of beneficiaries, with each beneficiary entitled to $250,000 of coverage."
"The coverage limit for a depositor’s accounts at a single bank depends on the account ownership structure, which includes types such as individual accounts, joint accounts, and accounts held in trust for beneficiaries."
How These Principles Maximize Coverage:
Single Account with POD Beneficiaries:
Language: "The coverage for a single account is determined by the depositor’s interest in the account and the number of beneficiaries."
If you have a single account with 5 POD beneficiaries, the FDIC insures $250,000 per beneficiary, which means up to $1.25 million total coverage.
Joint Account:
Language: "Each co-owner of a joint account is insured for up to $250,000 for their interest in the account."
If there are 2 co-owners, the FDIC insures $250,000 for each co-owner’s share, totaling $500,000.
Joint Account with POD Beneficiaries:
Language: "Each co-owner of a joint account, plus the number of beneficiaries, increases the total FDIC coverage."
A joint account with 2 co-owners and 5 POD beneficiaries would be insured for $1.25 million per co-owner, totaling $2.5 million.
Single Account with No Beneficiaries: FDIC coverage is $250,000 for the individual depositor. Legal language: "The FDIC provides $250,000 coverage per depositor for single ownership accounts held in a bank."
Combining Accounts:
Language: "FDIC coverage applies separately to different types of ownership categories."
By combining different account types, such as individual accounts, joint accounts, and POD accounts, you can maximize the total coverage.
Example of Maximizing Coverage with Different Account Types:
Let's say you want to maximize coverage using the principles above. Here's how you might structure it:
Single Account with 5 POD Beneficiaries:
Coverage: $1.25 million (for 5 beneficiaries, $250,000 each).
Joint Account with 2 Co-owners No Beneficiaries:
Coverage: $500,000 (for 2 co-owners, $250,000 each).
Joint Account with 2 Co-owners and 5 POD Beneficiaries:
Coverage: $2.5 million (for 2 co-owners, each with 5 beneficiaries, $250,000 per beneficiary).
Single Account, No Beneficiaries:
Coverage: $250,000.
Total Coverage:
$1.25 million (Single with POD) + $500,000 (Joint) + $2.5 million (Joint with POD) + $250,000 (single, no beneficiaries) = $4.5 million.
Key FDIC Insurance Principles (Language):
Ownership Structure: FDIC coverage depends on how the account is owned.
Beneficiaries: POD accounts allow for coverage based on the number of beneficiaries.
Joint Accounts: Joint accounts provide separate coverage for each co-owner.
Separate Coverage: Different types of accounts are treated separately for FDIC purposes, meaning you can combine them for higher total coverage.
Today is an interesting day with the announcement of Trump's tariffs. Should be interesting to see what affect it has on inflation, interest rates, GDP and the stock market.
I only use my Chase account to charge everything on my credit card, have my direct deposit go in every week, and pay my bills. Any "investment" money quickly gets moved out of there!
My point, and I have been making it for at least a year or two before the FDIC's April 2024 announcement about cutting their insurance limits, is that if you had for example individual accounts with no joint ownership and with 15 beneficiaries in the same financial institution, before the FDIC's April 2024 announcement you had insurance coverage on those accounts up to $3.75m.
That was the guarantee that was made when you opened the accounts. There is no ambiguity whatsoever about that.
Then, FDIC suddenly changes the rules on your existing accounts and reduced the coverage to $1.25 million. Even worse, they did not notify people who were stuck in that position with long-term CDs who had every right to rely on the promised coverage for the term of the CD. Even worse yet they did not grandfather in those accounts until the CD matured.
In other words they breached their promise and didn't even notify people so that they at least know that they were caught in a bait and switch fraud by the FDIC when they opened the CD. They didn't even have the decency to notify them.
So those people, if they were lucky enough to have the time to keep up with such developments which 99% of CD owners do not because they have lives unlike some of us, were in April of last year put in the position of either having to close those CDs and pay a penalty or to risk keeping a CD that is at least partially or mostly uninsured.
In spite of what the apologists for the crooked FDIC claim, this is unfair, unethical, very possibly illegal and should be the subject of a lawsuit if someone suffers a loss because of this. If I was in the position of having to take a penalty against my wishes, I would choose to be party to that lawsuit. If a private insurance company did this, their management would be put in prison for fraud. And the government would be leading the prosecution. If that isn't the definition of corruption I don't know what is.
This is a different issue than the issue of how much insurance you can have. It's about an improper change made by the FDIC to coverage you already had putting you in a precarious situation through no fault of your own.
Trust is the only value that the FDIC and NCUA provide. They need to convey that trust because without it the entire economy would collapse since the dirty little secret that most people don't know is that they can't do anything about a mass collapse of the banking system except print money and hand it to you. And in that case that money would be worthless.
So the whole system relies on trust. Unfortunately that trust is misplaced in these corrupt bureaucracies. And acts of fraud like this, promising you one thing and then pulling the rug out from under you and hoping you'll never find out, are exactly the reason why they need to be replaced.
It's outrageous that the same government entity that is constantly oppressing Banks and reducing how much they can pay their depositors with all this red tape and these draconian disclosure after disclosure after disclosure requirements pulled a stunt like this without giving any disclosure to those affected at all.
It's one reason why I hope the FDIC is in fact gutted and replaced with something that isn't hopelessly corrupt.
I was in the same situation. Whether or not you agree or disagree with the notification process they should have at least grandfathered those in with longer term cds. Since FDIC protection is one of the primary reasons for investing in cds to begin with, I am a little less inclined to purchase long term cds. My hope is any future changes will not result in a similar situation. If a 2 year timeline is the acceptable notification period I will most likely not purchase a cd over 2 years. Can we be100% confident that the FDIC insurance we are depending on now will be there in the future? Trust is the biggest issue. So in an effort to eliminate the issue I'll probably stay within 2 years.
If they can do it once they can do it again. They violated a fundamental principle of insurance and can no longer be trusted.
And sadly, as I've suspected they would for a long time the NCUA has now gone down the same unethical path.
We were able to get a built in oven, grill top, island and a great stainless steel vent over the grill top with the bonus money instead of just a slide in stove.
Maybe some people that were on this site at the time remember the credit union. I believe it was on the east side of the country. Maybe North Carolina? But none that changed the rates or rules of the accounts did not cause the whole agency to changed the rules. It was a California bank with big investors that invested 10 million in each of the start-ups they helped. The people over the limit were not to be covered in the future after 2008. But those with the gold, rule. But it was a deal the big banks made along with some of the bigger regional banks and the gov. that they would pay the money back to the gov. with higher insurance fees if they covered the money that was not insured.
The deal was to be the last time the FDIC would cover the inisured deposits and they would be paid back for the California bank and the other 2 on the east side of the country that went down also paying higher insurance fees. Heard that the person in the white house was one of the depositors but not one of the investors.
It takes 2 make a deal and I doubt it was the FDIC that approached Jimmy Dimon.
Use Edie. It will tell you. When you add enough beneficiaries you are covered