Alyssa Lane
If you have a substantial amount of money in the bank, you may want to consider insuring your deposits. In the US, the Federal Deposit Insurance Corporation (FDIC) provides deposit insurance of up to $250,000 per depositor, per insured bank, and per ownership category. This covers common deposit account types, including checking accounts, savings accounts, money market accounts, and certificates of deposit (CDs). However, if you have more than $250,000 in the bank, you may need to explore options for extending FDIC coverage or alternative solutions. One approach is to distribute your funds across multiple FDIC-insured banks or use different account ownership categories at your current bank. Additionally, some banks participate in programs that extend FDIC coverage beyond the standard limit, allowing for higher amounts to be insured. For example, SoFi Bank provides up to $2 million in protection by distributing deposits across its partner banks.
| Characteristics | Values |
|---|---|
| Standard amount insured by FDIC | $250,000 |
| FDIC insurance limit per | Depositor, insured bank, ownership category |
| Institutions that offer higher insurance | Wealthfront, SoFi, Wintrust, Betterment, CDARS, IntraFi Network |
| Maximum insurance offered | $10 million (joint accounts, Wealthfront) |
| Ways to increase insurance | Open multiple accounts, add account holders, use different ownership categories, use credit unions, use partner bank networks |
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What You'll Learn
Spread money across multiple FDIC-insured banks
If you have more than $250,000 in deposits at an FDIC-insured bank, you should ensure that all your money is federally insured. The simplest approach is to spread your money across several FDIC-insured banks or use different account ownership categories at your current bank.
One way to do this is to use a cash management account, which has features similar to checking, savings, and/or investment accounts. The FDIC insures the cash balance of a CMA, with some institutions offering coverage for as much as $5 million total. For example, Wintrust's MaxSafe account offers protection for balances of up to $4 million per account holder by distributing deposits across more than a dozen community banks.
Another option is to use a bank network like IntraFi Network Deposits, which works with thousands of banks and will spread your money across multiple banks to ensure you're adequately covered. Similarly, Impact Deposits Corp. offers insurance protection for excess deposits through its network of almost 200 FDIC-insured community banks.
Some financial institutions offer expanded FDIC insurance through their own partner bank networks. For example, SoFi Bank provides up to $2 million in protection by automatically distributing deposits across its network of partner banks. Wealthfront's Cash Account offers $5 million of FDIC coverage for individual accounts and $10 million for joint accounts through partner banks.
It's important to note that FDIC insurance applies to certain types of accounts, including checking accounts, savings accounts, money market accounts, and CD accounts. Investment products, including mutual funds, annuities, stocks, and bonds, are not covered by FDIC insurance.
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Use different account ownership categories
Bank account ownership categories refer to who owns an account, such as one person (single account) or a married couple (joint account). The Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA) use ownership categories to determine insurance limits for various accounts. FDIC insurance is automatically applied to any FDIC-eligible account, and each depositor is covered for $250,000 worth of deposits per depositor, per FDIC-insured bank, and per ownership category. The FDIC can also insure prepaid debit cards when certain conditions are met.
The FDIC and NCUA provide similar $250,000 coverage for accounts held at member banks and credit unions, respectively. However, by dividing funds into $250,000 or lower amounts and distributing them among multiple insured banks and credit unions, you can get the desired coverage. This can be achieved through the IntraFi Network Deposits program, which allows you to get FDIC insurance on millions of dollars through a network of financial institutions without opening accounts at multiple banks.
Additionally, some banks offer programs that extend FDIC insurance coverage beyond the standard limit, allowing for higher amounts to be insured. For example, Wealthfront's Cash Account offers $5 million of FDIC coverage for individual accounts and $10 million for joint accounts through partner banks. SoFi also offers access to $3 million of FDIC insurance on deposits through a network of participating banks.
It's important to note that investment products, including mutual funds, annuities, stocks, and bonds, are not covered by FDIC insurance. To determine if your bank is FDIC-insured, you can use the FDIC's BankFind tool or check the bank's website or branch location.
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Open a cash management account
Typically, the Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per account ownership category, and per institution. However, if you have $2 million in the bank, you can still ensure that your money is safe by opening a cash management account.
A cash management account is an account that has features similar to checking, savings, and/or investment accounts. They are typically offered by non-bank financial institutions, such as brokerage firms. Depending on the cash management account (CMA), your account may offer a debit card, check writing abilities, and earn interest, among other benefits.
Fidelity, for example, offers a cash management account that provides clients with a choice between a money market fund and an FDIC-insured cash option. The latter offers up to $5 million of FDIC insurance. This is because the institution partners with multiple FDIC-insured banks, allowing your money to be split among multiple banks.
Vanguard also offers a cash management account with a maximum FDIC coverage of up to $1.25 million for individual and trust accounts and $2.5 million for joint accounts.
Therefore, if you are looking to insure $2 million, opening a cash management account with a brokerage firm is a viable option. By partnering with multiple FDIC-insured banks, your money will be insured, and you will have the added benefits that come with a CMA.
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Open a joint account
Opening a joint bank account is a popular option for couples, family members, and business partners. It is a checking or savings account that is owned and controlled by two or more people. Joint accounts are beneficial for combining finances with a significant other, helping a parent manage their money, teaching children about money management, and giving business partners equal access to company funds.
To open a joint bank account, you must meet the bank's requirements and have a strong, trusting relationship with the other account holder(s). While joint accounts can make it easier to manage shared expenses and finances, they require clear communication and expectations about the use of the account and the money kept in it. All account owners are responsible for overdraft fees and other charges, and poor money management by one person can quickly become a problem for everyone involved.
When opening a joint account, it is important to understand the rules, including who is allowed to close it. In most circumstances, state law provides that anyone who can write checks on the account can close it. Additionally, creditors such as credit card companies and the IRS may take money from the joint account to cover any debt owed by one of the account holders.
Joint bank accounts can be beneficial for insuring large sums of money. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per account ownership category, and per institution. Joint accounts and individual accounts are considered different ownership categories, so each account holder of a joint account is insured for up to $250,000, resulting in a total coverage of $500,000 for the joint account.
Some financial institutions, particularly fintechs and online banks, provide FDIC coverage that exceeds the $250,000 limit. For example, Wealthfront's Cash Account offers $5 million of FDIC coverage for individual accounts and $10 million for joint accounts through partner banks. Additionally, some banks participate in programs that extend FDIC insurance to cover millions. For example, SoFi offers access to $3 million of FDIC insurance by spreading deposits across a network of participating banks.
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Open accounts at separately chartered banks
If you have more than $250,000 in deposits, you should ensure that all your monies are federally insured. The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per FDIC-insured bank, per ownership category. This limit has been the same for over a decade.
One way to ensure your money is adequately insured is to open accounts at separately chartered banks. This approach is particularly useful if you have more than $250,000 in a single account, as only a portion of your money will be protected by the FDIC. By opening accounts at different banks, you can take advantage of the FDIC insurance limit at each institution.
For example, if you have $300,000 in a savings account at Bank A, you could open a new savings account at Bank B with the same amount. This way, you would have $250,000 protected at each bank, bringing the total insured amount to $500,000.
It's important to note that simply opening multiple accounts at the same bank will not increase your coverage. For instance, three savings accounts at the same bank would still share the $250,000 limit. Therefore, diversifying your deposits across multiple banks is a more effective strategy to maximize your FDIC insurance coverage.
Additionally, you can explore banks that offer programs extending FDIC insurance beyond the standard limit, allowing for higher amounts to be insured. For example, Wealthfront's Cash Account offers $5 million in FDIC coverage for individual accounts through partner banks. Similarly, SoFi provides access to $3 million in FDIC insurance by spreading your money across a network of participating banks.
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Frequently asked questions
The Federal Deposit Insurance Corporation (FDIC) insures up to $250,000 per depositor, per account ownership category, and per institution. If you have more than this amount, you can insure your excess deposits by opening multiple accounts at different FDIC-insured banks, using different account ownership categories, or exploring partner bank networks that offer extended FDIC coverage.
Some examples of partner bank networks that offer extended FDIC coverage include SoFi, Wealthfront, and the IntraFi Network. SoFi provides up to $3 million of FDIC insurance by distributing deposits across its network of partner banks. Wealthfront offers $5 million of FDIC coverage for individual accounts and $10 million for joint accounts through its partner banks. The IntraFi Network includes community banks and community development financial institutions nationwide, with Wintrust Financial offering up to $3.75 million in FDIC coverage.
You can use the FDIC's BankFind tool, check the bank's website, or visit its branch location to determine if your bank is FDIC-insured.
Yes, an alternative to FDIC insurance is the National Credit Union Share Insurance Fund, which insures up to $250,000 per person, per institution, and per ownership category at credit unions with National Credit Union Administration membership. Another option is the Depositors Insurance Fund (DIF), which offers unlimited insurance above FDIC limits for Massachusetts residents or those banking with Massachusetts-based institutions.
