Current FDIC and NCUA Insurance Limits For Banks and Credit Unions

Published 6/9/09 (Modified 3/9/11)
By MoneyBlueBook

Update: New FDIC and NCUA Insured Limits Extended Until January 1, 2014

After months of bank failures and gloomy economic news, we finally have some good tidings from our federal government. No, it's not another round of stimulus checks for those of you who have been hoping and waiting with bated breath, but rather, it pertains to the FDIC insurance that guarantees the safety and security of bank deposits.

The current increased FDIC insurance limits of $250,000 were scheduled to be rolled back to the previous $100,000 limits on the last day of 2009. However just recently, Congress voted to extend the deadline for four more years - through December 31, 2013. Those of us who have significant amounts of money in the bank or sizable funds invested into long term certificates of deposit (CD rates) undoubtedly have been nervously eyeing the impending December 31 expiration date of the $250,000 threshold. Thus this news ought to come as a tremendous welcomed relief. Those of us who have been considering renewing our certificates of deposit can now consider maturities with a longer time horizon without fear of falling outside of federally protected limits.

Avoid Banks That Are Not FDIC Insured, Or Credit Unions That Are Not NCUA Protected

As many of you may know, if you have money in a bank account, your bank deposits are generally insured by the Federal Deposit Insurance Corporation (FDIC) up to the maximum current limit of $250,000. Similarly, if you have money saved in a credit union account, your deposits are insured by the National Credit Union Administration (NCUA) for the same amount as well. As federal government run entities, the two organizations jointly share in the responsibility of���� insuring and regulating the stability & financial health of our nation's banks and credit unions. All legitimate banks and credit unions operating in the United States are duly members of the relevant regulatory agency. If you are not banking at an FDIC insured institution, you're taking a huge risk. Banks that are not FDIC insured are either international banks or scams (yes, bank Ponzi schemes do exist). While most reputable international banks offer some protection through their own governmental authorities, you will want to do everything you can to steer clear of the uninsured but high yield dealers calling themselves banks.

FDIC and NCUA deposit insurance offer the maximum peace of mind assurances available as they are backed by the full faith and credit of the United States government. In the event of a bank or credit union failure, insolvency, or bankruptcy, the FDIC and NCUA have an orderly and systematic system in place to ensure a seamless and disruption free resolution. When banks fail, the FDIC takes over. They may sell the failed bank to another more stable bank (purchase and assumption method), or they may liquidate its assets and issue full payouts to customers (pay off method), making up any shortfall of funds from its own coffers. During any bank failure proceedings managed by the FDIC and NCUA, all interest income accrued up to the date of bank failure are guaranteed and paid out as well. Contrary to popular opinion, the FDIC and NCUA resolution processes are almost always very orderly and expedient, with little lag time and disruptions to account access during the resolution transition phase. For most customers in such an occurrence, a bank failure is a non-event as they are almost always permitted to continue using their customary bank services including checks, debit cards, and electronic transfers as before. At some point however, customers may be issued new cards, checks, or online banking information.

Federal Deposit Insurance Corporation (FDIC)

Created by the Glass-Steagall Act of 1933 in response to the massive number of bank failures during the Great Depression era, the Federal Deposit Insurance Corporation (FDIC) now services as a safety net for bank deposits in the event of a catastrophic insolvency emergency or rare run on the bank. Currently, FDIC insurance provides up to $250,000 worth of protection per depositor, per insured bank for the following accounts:

• Checking account (negotiable order of withdrawals)
• Savings and money market accounts
• Certificates of deposit and other time deposit accounts
• Cashier's checks and other checks drawn on the member bank's accounts
• Certain investment retirement accounts (IRA's) in deposit based accounts

Not everything is covered. As a general matter, financial investments and bank conveniences such as - stocks, bonds, money market funds, annuities, insurance policies, and even bank safe deposit boxes are not covered by the FDIC.

Because the general coverage limit that FDIC insurance provides is $250,000 per depositor per bank, there is no sense in opening multiple accounts of the same type at any one bank to circumvent this restriction. The only way to exceed this mark yet remain fully protected under permissible limits is to either spread your money among different banks, or if you wish to stick with a single bank - open multiple accounts with different deposit categories of legal ownership. The FDIC recognizes eight different ownership categories - single accounts, certain retirement accounts, joint accounts, revocable trust accounts, irrevocable trust accounts, employee benefit plan accounts, corporation/partnership/unincorporated association accounts, and government accounts. As each of these different account ownership categories qualify for its own $250,000 insurance limit,���� it is possible to have total deposits of more than $250,000 at any one insured bank and still be fully insured. To demonstrate, here's an example and run through of how a married couple could hypothetically insure up to $2 million at any one bank:

• Husband and wife each deposits $250,000 in separate individual accounts
• Together, they have $500,000 in a shared joint account
• Individually, each has $250,000 in separate IRA deposit accounts
• Each also sets up a $250,000 revocable trust account, payable on death, naming the other one as beneficiary

Avoid banking with institutions or organizations that are not covered by federal government insurance. Particularly if you are a high yield savings account or bank rate chaser like myself, more likely than not you'll come into contact with online banking names like Dollar Savings Direct, EverBank, Ally Bank, or even E-trade - bank names that are either unfamiliar to you or names whose reputations or stability concerns you haven't fully vetted yet. While most reputable banks will clearly display their FDIC insured member logos, it's always important to confirm this fact for yourself. Verifying your bank's FDIC insurance coverage is easy - simply call the FDIC's telephone number at: 1-877-275-3342, or preferably, visit the online FDIC Bank Find page. To find an institution by FDIC certificate number (every FDIC member institution carries one) or to search via geographical or statistical criteria, simply click on "More Search Options" via FDIC Bank Find for more choices. As the Bank Find website notes, the service can also help you answer pressing questions such as - Is my bank insured? Where are my bank's branches located? Where is my bank's home (main) office located? What is my bank's web site address? What happened to my bank (historical list of events)? Does my bank have a new name? And Is my bank still open?

National Credit Union Administration (NCUA)

All legitimate credit unions in the United States offer deposit insurance protection for their account holders via the NCUA. The National Credit Union Administration is the independent federal agency that supervises and regulates the operations & stability of all federal not-for-profit credit unions.

Like the FDIC, the NCUA's insurance limits are guaranteed by a federal fund that's backed by the full faith and credit of the United States government, and as such, are 100% safe from catastrophic loss or insolvency. Now that the $250,000 coverage limits provided by the National Credit Union Share Insurance Fund have been extended through December 31, 2013, credit union customers should be able to rest easier. Hopefully the higher protection limits will be extended into indefinite perpetuity or made legally permanent. Beats me why the FDIC and NCUA haven't already done so.

If you have an account at a credit union, chances are your funds are protected by NCUA member insurance, with account protection rules and different account ownership categories that are similarly set up to run as that offered by FDIC insurance. However, to be sure, it's always important to confirm that your credit union is a legitimate entity and fully insured before doing business with them. If you are unable to find a NCUA member placard logo displayed anywhere on the credit union's website or store front, I'd recommend that you confirm its membership by calling the NCUA's telephone number at 1-800-755-1030, or by preferably visiting the NCUA's Is My Credit Union Federally Insured lookup page.