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KEEPING YOUR MONEY SAFE
One of the most prominent symbols in the banking industry is
"Member FDIC." This stand for the Federal Deposit Insurance
Corporation. They insure deposits of nearly every U.S. bank and
loan and savings institutions up to $100,000 per customer
(individual or business) in the event of a bank failure.
Retirement accounts are insured for as much as $250,000.
What does FDIC cover?
- Savings accounts that you can withdraw from or add money to at any
time.
- Regular checking accounts and ones that earn interest (NOW accounts) as
well Money Market Accounts (MMDAs). MMDAs are savings accounts
that allow for a certain amount of checks to be written every
month.
- Certificates of deposit (CDs). These accounts typically require that you
keep a certain amount of funds in the account for a specific
time frame -- otherwise known as the maturity.
What doesn't FDIC cover?
- Bonds, mutual funds and stocks.
- United States Government backed investments, i.e. savings bonds and
Treasury securities.
- Safe deposit boxes. These are not considered deposit accounts. They are
storage spaces rented to customer's by the banks. It is
important to note that a renter's or homeowner's insurance
policy very well may cover the items in your safety box in the
event of theft or damage.
- Losses as a result of fraud or theft at the institution. However, banks
have special insurance policies purchases from private companies
that cover these instances.
- Instances of error on your account. In these situations, there may be
remedies for consumers under state contract law, the Uniform
Commercial Code and some federal regulations, depending on the
type of transaction.
- Annuity and insurance products, i.e. life, home and
auto insurance.
Mutual funds or
MMDA
These two products have similar names but are very different
from one another. Funds that invest primarily in government
securities or short-term corporate bonds and are not deposit
accounts insured by the FDIC are called money market mutual
funds. MMDAs are deposits and, as mentioned, are covered by FDIC
insurance.
Even though the basic federal insurance amount is $100,000, you can
are entitled to obtain more than $100k of coverage if your funds are
kept in different ownership categories. For example, you can
obtain coverage for as much as $100,000 for
your individual accounts at the bank, another $100,000 for your
share of joint accounts at the same bank and yet another
$250,000 for your retirement accounts there.
Unprotected CDs
It is important to note that there are a variety FDIC-insured CDs being
sold through deposit brokers and offered by financial
institutions that have have out of the ordinary
features that may result in the FDIC protecting only the
principal during the term of the CD
For example, a ten-year CD with a varying interest rate
dependant on the rise and fall of the stock market, that has no
definite minimum interest rate and pays only when the CD
matures in ten years instead of accumulating interest on a
monthly or daily basis.
Credit unions
The federal agency that insures deposits in federal credit
unions and state credit unions that are federally insured is
called the National Credit Union Administration. Deposits of member
institutions are insured up to $100,000 per customer (individual
or business).
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