Are All Bank Accounts Insured by the FDIC?

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Federal Deposit Insurance Corp. (FDIC) provides insurance for the vast majority of bank accounts, although some banks do not have FDIC protection. Learn how FDIC insurance keeps your money safe, about the limits of protection, and which assets are typically insured.

Key Takeaways

• Most, but not all, banking institutions are insured by the FDIC.
• The Federal Deposit Insurance Corp. (FDIC) protects you against loss if your bank or thrift institution fails.
• Eligible bank accounts are insured up to $250,000 for principal and interest.
• The FDIC doesn't insure share accounts at credit unions, which are insured by the NCUA.

What Does it Mean to Be FDIC-Insured?

The FDIC is an independent agency of the U.S. government that protects you against loss of deposit if your bank or thrift institution fails and is FDIC-insured. To keep public confidence, the federal government created the agency during the Depression in 1933.

When you open a bank account like a checking account or savings account, you expect the money you deposit to be safe. These accounts don't work as a personal vault. Instead, banks usually keep a certain amount of cash on hand, but the majority of your money is lent out so the bank can make money.

When banks can't keep up with the demand for withdrawals, they may have to turn depositors away. When more customers want their money and can't get it, they end up losing confidence, resulting in a panic.

This, in turn, can trigger a domino effect, leading to a failure in the banking system like during the Great Depression. FDIC insurance keeps your money safe in such situations.

So, if you have money in an FDIC-insured bank account and the bank fails, the agency reimburses you for any losses you incur.

Many banks use the fact that they're insured as a selling point, even though most bank accounts have FDIC protection. In other words, an uninsured bank can't compete effectively in an industry where consumers expect their money to be protected. To see if your bank is FDIC-insured, check out the FDIC Bank Find Suite page.

What Does FDIC Insurance Cover?

The FDIC doesn't insure all type of accounts. Insured accounts include negotiable orders of withdrawal (NOW), money market deposit accounts (MMDA), checking accounts. savings accounts, and certificates of deposit (CD). FDIC insurance covers the principal and interest of an account, not exceeding the $250,000 limit.

The Bottom Line

The FDIC protects bank account holders against loss, up to a certain amount, if their bank or thrift institution fails. However, not all banking institutions or types of financial accounts are insured by the FDIC. Eligible bank accounts like savings accounts, CD accounts, and checking accounts are insured up to $250,000 for principal and interest.

Usually, banks will advertise this protection for their customers, or you can ask a banker when considering opening a new account. If your money is deposited in a credit union, be aware that the FDIC doesn't insure those accounts, but they are covered by the NCUA.

1. Federal Deposit Insurance Corporation. "History of the FDIC."
2. Federal Deposit Insurance Corp. "Understanding Deposit Insurance."
3. Federal Deposit Insurance Corp. "Your Insured Deposits."
4. National Credit Union Association. "Share Insurance."

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A Negotiable Order of Withdrawal (NOW) Account is an interest-earning bank account. A customer with this type of account can write drafts against money held on deposit.

A deposit interest rate is the interest rate paid to deposit account holders for accounts like certificates of deposit (CD) and savings accounts.

An Individual Development Account (IDA) is a savings account to help lower-income individuals build assets to achieve financial stability.

A sweep account automatically transfers amounts over or below a certain level into a higher interest-earning investment option.

A Christmas club is a savings account to help people save for the holidays. Money is deposited throughout the year and withdrawn before the holidays.

Overdraft protection is an optional bank account service that prevents the rejection of charges that are in excess of available funds.

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