In this article:
- Are Bank Deposits Safe?
- Which Bank Accounts Are Insured?
- How to Safeguard Your Savings
Your money at a bank or credit union is likely safe—even if that company fails. Most banks and credit unions have insurance that covers up to $250,000 of your money, and your coverage could be even higher if you hold joint accounts. However, having a backup checking or savings account could be a good idea anyway.
Are Bank Deposits Safe?
Almost every bank and credit union has insurance from the Federal Deposit Insurance Corp. (FDIC), for banks, or the National Credit Union Administration (NCUA), for federal credit unions.
These organizations maintain insurance funds that protect the money you have in eligible accounts at the institution. If the company fails, the insurance fund can quickly make you whole. You automatically receive the insurance coverage when you deposit money into an eligible account.
How Do FDIC and NCUA Insurance Work?
The FDIC and NCUA are independent agencies that, among other things, manage insurance funds for their covered financial institutions.
The agencies finance the insurance funds in different ways, such as requiring banks to pay premiums and credit unions to keep a portion of their deposits in the fund. Both organizations are also backed by the full faith and credit of the U.S. government.
If a credit union or bank might have trouble meeting its obligations, such as having enough cash to satisfy withdrawals, the FDIC or NCUA can step in to help protect depositors and members.
For example, if your bank is in trouble, the FDIC can force the bank to close―this is a bank failure―to protect its customers. When this happens, the FDIC can move all your insured funds to an account at a new bank or write you a check for the insured amount. This generally happens within a few business days.
FDIC Coverage Limits
To keep your money safe, you'll want to maintain balances that are below the FDIC coverage limits, which are $250,000 per depositor, per ownership category, per FDIC-insured bank.
The ownership categories and their limits for consumers and non-government entities are:
| FDIC Coverage Limits by Ownership Category | |
|---|---|
| Ownership Category | Coverage Limit |
| Single accounts (one person owns the accounts) | $250,000 per owner |
| Joint accounts (two or more people own the accounts) | $250,000 per co-owner |
| Certain retirement accounts (includes IRAs and self-directed 401(k) plans) | $250,000 per owner |
| Revocable trusts | $250,000 per owner per unique beneficiary |
| Irrevocable trusts | $250,000 per unique beneficiary that's entitled to the account |
| Corporation, partnership and unincorporated association | $250,000 per corporation, partnership or unincorporated association |
For example, if you have under $250,000 in deposits at an FDIC-insured bank, then all your money is safe.
But if you have $20,000 in a checking account, $130,000 in a savings account and $200,000 in a CD, you have $350,000 in total. It doesn't matter that they are different types of accounts, such as checking and savings. All the money is at the same bank and in "single accounts" (one ownership category), which leaves $100,000 uninsured.
However, if the $200,000 CD is an IRA CD, all your money would be insured because the IRA is a different ownership category—retirement account rather than single account.
Alternatively, if it's not an IRA CD, you could keep the CD at your current bank and move your checking and savings to a different FDIC-insured bank. Because the coverage is per FDIC-insured bank, all your money will be insured.
Even if you have amounts that are over the FDIC coverage limit, you might still receive some of the money back when the FDIC sells the failed bank's assets, but this could take several years. In rare cases, the FDIC has also fully guaranteed deposits that exceed the coverage limits and worked quickly to make depositors whole and calm worries about bank failures.
Which Bank Accounts Are Insured?
The insurance is only available on covered bank accounts, which are:
- Checking and savings accounts
- Negotiable order of withdrawal (NOW) accounts
- Money market deposit accounts (MMDA)
- Certificates of deposit (CDs)
- Official bank-issued items, such as cashier's checks and money orders
- Registered prepaid cards
Certain retirement accounts may also be covered, including IRAs and self-directed 401(k) plans. The FDIC shares more specifics on its website, but, in essence, you need to have the ability to choose how you invest the money and the option to keep it at an FDIC-insured bank in order to be covered.
Which Types of Accounts Are Not Insured?
Neither the FDIC nor the NCUA insurance covers investments or other types of accounts, including:
- Stocks or bonds
- Mutual funds or exchange-traded funds
- Cryptocurrencies, including crypto-backed savings accounts
- Life insurance policies
- Annuities
- Municipal securities
- Safe deposit boxes and their contents
- U.S. Treasury bills, bonds and notes
If you have a brokerage account, your assets could be covered by Securities Investor Protection Corp. (SIPC) insurance. The SIPC insurance offers up to $250,000 in coverage for cash and another $250,000 for securities—various types of investments. However, the insurance doesn't cover investment losses. It protects you from losses due to an SIPC-member brokerage firm failing.
How to Safeguard Your Savings
For most people, the FDIC and NCUA insurance limits are high enough that all their money is covered and safe. The agencies can quickly move in to protect depositors and members if a bank or credit union fails—giving you quick access to your cash.
However, there are a few things you could do if you have more cash than the insurance limits cover or you're worried about your money being tied up when you need it.
- Use the FDIC and NCUA insurance estimators to see if all your savings are insured.
- Look into banks and fintechs that offer higher FDIC insurance limits by partnering with other banks and strategically moving your money.
- Keep money in several different FDIC- or NCUA-insured institutions to ensure you'll have quick access to cash if one organization fails.
Additionally, consider how you want to grow your money over time. You can earn interest with high-yield savings accounts, CDs and other types of covered accounts. But often, you need to take on more risk and invest your money to earn higher returns.
The Bottom Line
Most banks and credit unions are covered by either FDIC or NCUA insurance, and these agencies―along with state and federal agencies—work quickly to protect your money during a failure. You might not experience any disruption in your access to your online accounts or local branches, especially if your deposits are under the insurance limits. However, if you're worried, having some savings at a different bank or credit union could be helpful.
