So far this year, 124 U.S. banks have failed. That’s according to the FDIC’s appropriately named Failed Bank List. This total compares with 26 in 2008, two in 2007, and zilch in both 2005 and 2006.
So, what happens to your money if it’s in a bank that fails? For starters, as long as your (or your family’s) accounts at any FDIC-insured bank total less than $250,000, your money is covered by FDIC insurance. (While the total amount that could be covered at any one bank used to be $100,000, the limit was raised to $250,000. That limit is currently good through 2013, the FDIC says.) And, in some cases, you could have more than $250,000 at a bank and still be covered. (More on that later.)
That raises another question – how do you know if your bank is covered by FDIC insurance? Again, you can use the web. Head to FDIC Bank Find, and type in the name of your bank. You can check that your bank is insured, get a list of its office locations, and find out a lot more about it than you probably want to know.
OK, once you’ve figured out if your bank comes under FDIC coverage, how can you verify whether your own accounts are protected? Now, it’s time to use what the FDIC calls EDIE, which is short for Electronic Deposit Insurance Estimator. This is useful if you have several accounts at one bank, and the total is over the $250,000 FDIC insurance limit. Depending on the ownership structure of each account, the entire sum may be protected. For instance, in one of the examples on the EDIE website, one spouse has a money market account in his name, the other spouse has a CD in her name, and they co-own an account that is payable-on-death to their daughter. The total amount in the bank is well over $250,000, but it’s all covered by FDIC insurance.
Of course, if your bank does fail, you’re probably going to want to make sure you have access to your hard-earned money, whether it’s insured or not. The FDIC says its goal is to make deposit insurance payments within two days of a bank failure; by law, the agency is required to make payments as soon as possible. Payouts on more complicated accounts, such as those linked to trusts, could take longer than a couple of days, however.
Interest on your accounts will stop accruing once it closes. However, if another bank takes over a failed bank, it would re-set interest rates and begin accruing interest again.
If you still have questions about a failed bank – say, you want to identify and contact the bank that acquired it – you can head to the also appropriately named Failed Financial Institution Contact Search from the FDIC. Plug in the name of the bank and you can find, among other information, the name, phone number and website address for the acquiring bank, as well as the last date to file a claim against the bank.
So far, I’ve been fortunate when it comes to my banks (knock on wood). None have failed, so I haven’t had to make use of any of these tools. However, it’s good to know that they’re available. How about you? Have you used a bank that has gone under? How easy was it to make sure that your money was safe and sound?