You may have heard of “FDIC-insured deposits,” and wondered what it means exactly? FDIC stands for the Federal Deposit Insurance Corporation, which was created in 1933 in response to the severe bank panics brought on by the Great Depression.
During the 19th century, bank panics were relatively common: when economic downturns and unemployment caused consumer confidence to plummet, many investors would panic about the safety of their money, and withdraw their cash from the banks. After the “Panic of 1893,” when the failure of several banks involved in shaky railroad financing caused a run on the banks, the federal government began to draw up plans to create better security for bank deposits, since bank runs had the effect of making the economy worse. So they created an institution that would guarantee deposits held by commercial banks.
The FDIC provides deposit insurance to guarantee the security of checking and savings deposits to its “member” commercial banks. You can tell which banks are members of the FDIC because they display an offical FDIC logo at each teller window.
Deposits are insured up to the amount of $100,000.00 per depositor per bank. If you have more than $100,000.00 to deposit, you could deposit your money at two different institutions, or you could place accounts in different ownership names. For instance, a trust, joint account, or beneficial ownership would be considered as separate accounts with different ownership names. Switching the order of names on a joint account (ie, David and Hortense Willinger instead of Hortense and David Willinger) does not count as a different ownership name, because the owner’s names are the same.
Certificates of deposit are one of the safest investments because they are treated as a bank deposit and insured by the FDIC. The FDIC does not insure stocks, bonds, annuities, municipal securities, or mutual funds. They also do not insure the contents of safe deposit boxes. Check out the current CD rates.
