What is the FDIC
What You Should Know About the FDIC
The world monetary crisis has dried up the credit market, caused financial giants like Lehman Brothers to collapse, and forced massive banks to merge, making many people wonder where their cash will be safe. Through the FDIC or the Federal Deposit Insurance Corporation the bank remains the best place to keep your money with no matter what happens to your bank. In October 2008 the deposit insurance was momentarily raised to $250,000 per depositor through December 31, 2009, so if your area bank falls you are still entitled to your deposit up to $250,000.
Get to Know the FDIC
Established in 1933, the FDIC was created to ensure public confidence in the banking. This worked by providing all depositors in FDIC-insured banks coverage up to $5,000 (in the 30s), and second by taking over for a failed bank to collect and sell the banks assets to settle the banks debts including claims for deposits in excess of the insured amount. The FDIC receives its funding from premiums paid by insured banks as well as earnings from its investments in US Treasury securities; no federal or state taxes are used.
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Are you safe?
To take advantage of the full protection the FDIC offers, there are a couple of things to bear in mind. First FDIC coverage does not extend to all finance establishments so ask your bank if they are covered or check the FDIC site to see whether you bank is listed. Second coverage is for individual deposit accounts only up to $250,000 so no stocks, bonds, safety deposit boxes, hedge funds, etc.
Beyond the $250,000 Coverage
For coverage beyond the $250,000 there are a few specific instances such as establishing deposits under different ownership categories where excess coverage is allowed. Revocable Trust Accounts, or a deposit account opened by people with the stated intention of the account being turned over to one or more beneficiaries upon the death of the original account holder, can get over $250,000. For example if Mr. Smith has an deposit account worth $500,000, both his son and daughter would get $250,000 each if they were the beneficiaries named on the account.
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