Haris Ashley
If you have more than $250,000 in the bank, you may want to consider how to ensure your funds are protected. The Federal Deposit Insurance Corp. (FDIC) insures up to $250,000 per depositor, per institution, and per ownership category. This means that if you have more than the insured amount in a single account, only a portion of your money is protected. However, there are several options available to ensure your funds are fully covered.
| Characteristics | Values |
|---|---|
| Amount insured by FDIC per depositor | $250,000 |
| Number of institutions | 1 |
| Number of ownership categories | 1 |
| Account types covered | Checking, savings, money market, certificates of deposit (CDs), negotiable order of withdrawal (NOW), cashier's checks, money orders |
| Account types not covered | Stock and bond investments, mutual funds, life insurance policies, annuities, municipal securities, safe deposit boxes, Treasury bills, bonds and notes, cryptocurrencies |
| Alternative insurance | Depositors Insurance Fund (DIF), National Credit Union Administration (NCUA), IntraFi Network |
| Alternative insurance limit | No limit (DIF), $250,000 (NCUA) |
| Alternative insurance providers | About 70 banks (DIF), Credit unions (NCUA), Various banks (IntraFi Network) |
| Alternative insurance conditions | Massachusetts-chartered banks (DIF), N/A (NCUA), FDIC-insured banks (IntraFi Network) |
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What You'll Learn
Open an account at a second FDIC-insured bank
If you have more than $250,000 in the bank, you may want to consider opening an account at a second FDIC-insured bank. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per institution, and per ownership category at member banks. This means that if you have more than $250,000 in one bank, your money may not be fully protected in the event of a bank failure.
By opening an account at a second FDIC-insured bank, you can ensure that your funds are fully protected. This strategy is known as "spreading your money around" or "banking at multiple institutions." It is a simple and effective way to increase your FDIC coverage and protect your financial assets.
When considering a second bank, it is important to verify that it is, in fact, FDIC-insured. You can do this by checking the FDIC certificate number, which is unique to each bank. Additionally, you may want to evaluate the different ownership categories offered by the bank, such as single, joint, retirement, trust, business, and government accounts. Each ownership category provides its own $250,000 insurance limit, so choosing a bank with a variety of options can further maximize your protection.
It is worth noting that not all types of accounts are covered by FDIC insurance. While traditional deposit accounts, such as checking, savings, and money market accounts, are typically insured, investment products like stocks, bonds, mutual funds, life insurance policies, annuities, and municipal securities are generally not covered. Therefore, when opening an account at a second FDIC-insured bank, it is important to consider the types of accounts offered and ensure that your funds are held in insured accounts.
In summary, opening an account at a second FDIC-insured bank is a straightforward way to insure more than $250,000 in the bank. By understanding the FDIC coverage limits, verifying the bank's FDIC status, considering different ownership categories, and choosing insured account types, you can effectively protect your financial assets and gain peace of mind.
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Spread your money across different banks
If you have more than $250,000 in the bank, you may want to consider spreading your money across different banks to ensure your funds are covered. Here are some strategies to achieve this:
Open Accounts at Multiple Banks
One option is to open accounts at multiple banks. By doing so, you can take advantage of the Federal Deposit Insurance Corp. (FDIC) insurance, which covers up to $250,000 per depositor, per institution, and per ownership category. By spreading your money across different banks, you can ensure that your funds are protected up to the FDIC limit at each institution. Make sure to choose distinct institutions by checking their unique FDIC certificate numbers.
Utilize Different Ownership Categories
Another strategy is to maintain accounts in multiple ownership categories. For example, you can have individual accounts, joint accounts, retirement accounts, trusts, or business accounts. By diversifying your accounts across different ownership categories, you can increase your overall coverage. This approach allows you to keep your holdings insured at a single bank or across multiple banks.
Explore Credit Unions and Brokerage Firms
Credit unions, such as those offering NCUA insurance, can provide the same $250,000 coverage per account ownership category as the FDIC. Credit unions often offer higher interest rates and lower fees. Additionally, consider working with brokerage firms that offer FDIC-insured deposit accounts. Many of these firms automatically spread your money across multiple partner banks, providing you with FDIC coverage at each institution.
Take Advantage of IntraFi Network Banks
If you prefer to keep your money at one bank, look for institutions that are part of the IntraFi Network. This network will funnel your money into deposit accounts at other network banks, allowing you to maintain FDIC coverage while keeping your funds in one place.
Consider Private Insurance Funds
In addition to FDIC insurance, you can explore private insurance funds like the Depositors Insurance Fund (DIF). DIF provides coverage for deposit amounts at member banks beyond what the FDIC covers, without a specified limit. However, DIF coverage is currently limited to about 70 banks based in Massachusetts.
By implementing these strategies and spreading your money across different banks and institutions, you can effectively insure amounts over $250,000 and ensure the protection of your funds.
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Use a cash management account
If you have more than $250,000 in the bank, you may want to consider using a cash management account (CMA) to ensure your funds are insured. CMAs are offered by non-bank financial service providers, such as brokerage and investment firms, and they combine the features of checking, savings, and/or investment accounts.
FDIC Insurance Coverage
CMAs offered by non-bank financial service providers are insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures up to $250,000 per depositor, per institution, and per ownership category. While the FDIC insurance limit per account holder is $250,000, some CMAs provide additional coverage. For example, the Fidelity Cash Management Account offers FDIC insurance of up to $5 million through partner banks.
Higher Interest Rates
CMAs often offer higher interest rates compared to traditional bank accounts. This allows you to earn a competitive rate of return on your cash balance.
Convenience and Accessibility
CMAs provide the convenience of having checking, savings, and investment features in a single account. Many CMAs offer unlimited global reimbursement on ATM withdrawals, free check writing abilities, and a debit card for spending and withdrawals.
No Account Fees or Minimums
Some CMAs, like the Fidelity Cash Management Account, have no account fees or minimum balance requirements. This makes them a cost-effective alternative to traditional bank accounts.
Fidelity Cash Management Account
The Fidelity Cash Management Account is a highly-ranked CMA that offers FDIC insurance of up to $5 million through partner banks. It has no account fees or minimum balance requirements and provides unlimited ATM fee reimbursement and free check writing.
Wealthfront Cash Account
The Wealthfront Cash Account offers a competitive 4.00% APY with no fees. Customers receive a debit card and can withdraw cash from over 19,000 fee-free ATMs. This account also allows for early direct deposits and links to payment apps such as Venmo and Cash App.
Betterment Cash Reserve and Betterment Checking
The Betterment Cash Reserve and Betterment Checking accounts have no fees and only require a $10 minimum balance to open. Individual accounts receive up to $2 million in FDIC insurance coverage through partner banks. Betterment Checking offers a debit card, mobile check deposit, and reimbursement of ATM fees worldwide.
Vanguard Cash Plus
The Vanguard Cash Plus account offers a high-yield interest rate with no minimum balance requirements. There are no fees as long as you sign up for e-statements; otherwise, there is an annual fee of $25. Customers can get up to $1.25 million in FDIC insurance on individual accounts through partner banks.
By using a CMA, you can ensure that your funds exceeding $250,000 are insured and take advantage of the additional benefits these accounts offer.
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Use the Depositors Insurance Fund (DIF)
The Depositors Insurance Fund (DIF) is a private insurance fund that insures deposits at member banks beyond what the Federal Deposit Insurance Corporation (FDIC) covers. About 70 banks offer DIF coverage, and all of them are based in Massachusetts.
The FDIC has limitations on the amount of money it can insure per depositor, per institution, and ownership category. The FDIC insures up to $250,000 per depositor, per institution, and ownership category at member banks. The FDIC manages the level of the DIF to maintain public confidence in the financial system and to resolve failed banks. The money in the DIF is set aside to pay back the money lost due to the failure of a financial institution.
The DIF has two sources of funds: insurance premiums from FDIC-insured institutions and interest earned on invested funds. Insurance payments made by banks fund the DIF. The FDIC manages the DIF to protect customer deposits at member banks. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 modified the FDIC's fund management practices by setting requirements for the Designated Reserve Ratio (DRR) and redefining the assessment base, which is used to calculate banks' quarterly assessments.
In response to these statutory revisions, the FDIC developed a comprehensive, long-term management plan for the DIF designed to reduce pro-cyclicality and achieve moderate, steady assessment rates throughout economic and credit cycles while also maintaining a positive fund balance even during a banking crisis. The DIF balance and reserve ratio are published in the Quarterly Banking Profile.
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Use a network of partner banks
If you have more than $250,000 in the bank, you may want to consider using a network of partner banks to ensure your money is insured. This approach allows you to keep all your money in one bank while still benefiting from FDIC insurance coverage.
The IntraFi Network, for example, allows you to keep all your money at a single bank within its network. The program then funnels your money into deposit accounts of your choice at other network banks. This way, you can have FDIC insurance on millions of dollars without having to open accounts at multiple banks.
Similarly, the IntraFi Network Deposits program divides large deposits into demand deposit accounts, money market deposit accounts, and certificates of deposit at FDIC-insured banks. This allows you to insure large sums of money without the hassle of managing multiple accounts at different banks.
Some banks also partner together to form reciprocal deposit networks, where deposits to one financial institution can be split between multiple institutions, thus increasing FDIC coverage. For example, if your deposit is held among 10 different banks, your FDIC coverage limit increases tenfold to $2.5 million.
By using a network of partner banks, you can ensure that your money is protected and insured, even when dealing with sums greater than $250,000. This approach simplifies the process of insuring large amounts of money, allowing you to maintain your banking relationships while staying protected.
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Frequently asked questions
The Federal Deposit Insurance Corp. (FDIC) insures up to $250,000 per depositor, per institution, and ownership category. If you have more than this amount, you can consider opening an account at a second FDIC-insured bank or using a program like IntraFi Network Deposits to spread your money across different FDIC-insured accounts.
Yes, the Depositors Insurance Fund (DIF) is a private insurance fund that covers member banks beyond the FDIC limit, without a specified maximum. However, DIF coverage is currently only offered by about 70 banks, all based in Massachusetts.
FDIC insurance covers checking and savings accounts, money market accounts, certificates of deposit (CDs), negotiable order of withdrawal (NOW) accounts, and cashier's checks or money orders issued by the bank.
Yes, investment products like stocks, bonds, mutual funds, life insurance policies, annuities, cryptocurrencies, and municipal securities are not covered by FDIC insurance.
You can use the FDIC's BankFind tool, Electronic Deposit Insurance Estimator (EDIE), or call the FDIC directly at 877-275-3342 to verify your coverage.
