Many banks will display the FDIC logo at their branches and on their website, but many people are not clear on exactly what the FDIC is and how it can really help them. The FDIC backs banks in the event of a financial shut down, in addition to protecting customers from losing their deposits. It is important to make sure you choose a bank that is backed by the FDIC, so your money is safe.

What is FDIC insurance?

FDIC insurance is set up by the federal government to protect banks in the United States and their patrons. During the Great Depression, many banks failed, and people who had money held in a deposit account at the institution lost their funds as a result.

In response to this, the government set up the FDIC. If the FDIC certifies a bank, it means that the money you have in the account will be covered, so that you aren’t left in financial ruin, due to the bank’s poor business practices.

The Federal Deposit Insurance Corporation was established in 1933. It stands as a regulatory body for the banking industry. They monitor banks’ practices to make sure financial institutions are operating in a way that is safe for consumers.

In the 1980s and 1990s, they oversaw banks that shut down and distributed insured funds to account holders to minimize the loss. However, if you own stock in a bank, the FDIC does not protect the value of the stock. FDIC insurance is in place to solely protect account holders.

FDIC Insurance Limits

The FDIC insurance limits were recently adjusted after the financial crisis in 2008. The new limit is $250,000 per account holder per bank. Banks have different types of accounts and account holder types, which makes it difficult for the FDIC to determine the exact amount of coverage you’re eligible for through your bank.

For example, retirement accounts are not grouped with your other deposit accounts, but only if the retirement account is tied to other specific account types (usually CDs), and not invested in the stock market.

How to Work Around FDIC Limits

There are ways to work around FDIC limits. The name on your account will determine the limit. If you have an account, your spouse has an account, and you share a joint account, you can receive up to $750,000 total coverage at that bank.

The laws look at the way the account is opened as well as who holds it, and joint accounts are reviewed separately from single-owner accounts. This gives you more flexibility in setting up and protecting your accounts.

Another option to protect yourself is to have a deposit account at multiple banks. This does not mean different branches of the same bank.

Do You Have FDIC Coverage?

A bank will display a sign on the door and at each teller station indicating that they have FDIC coverage. You can also check their website to make sure that the bank has coverage.

Credit unions are not protected by FDIC insurance coverage. However the National Credit Union Association (NCUA) offers the same type of coverage with the same rules.