What are commercial banks insured by?
Commercial banks in the United States are insured by the Federal Deposit Insurance Corporation (FDIC). This federal agency insures deposits at member banks up to $250,000 per depositor, per insured bank, for each account ownership category.
What is the FDIC?
The FDIC stands for the Federal Deposit Insurance Corporation. It is an independent agency of the United States government that protects depositors against the loss of their insured deposits if an FDIC-insured bank fails.
How does FDIC insurance work?
If a bank fails, the FDIC will step in to cover the insured deposits of individual depositors up to the insurance limit of $250,000 per depositor, per insured bank. This coverage includes principal and interest, as well as any accrued interest.
Are all commercial banks insured by the FDIC?
No, not all commercial banks are insured by the FDIC. To be insured by the FDIC, a bank must be a member of the FDIC and display the official FDIC logo at their branches and on their website.
Is FDIC insurance automatic?
Yes, FDIC insurance is automatic for depositors at FDIC member banks. Deposits are insured up to the limit without any action required on the part of the depositor.
What types of accounts are covered by FDIC insurance?
FDIC insurance covers all types of deposits at FDIC-insured banks, including checking accounts, savings accounts, money market deposit accounts, and certificates of deposit (CDs).
What is the purpose of FDIC insurance?
The purpose of FDIC insurance is to provide depositors with confidence and peace of mind by guaranteeing the safety of their deposits in the event of a bank failure.
What happens if a depositor has more than $250,000 in one bank?
If a depositor has more than $250,000 in one bank, only the first $250,000 is insured. Depositors can increase their coverage by spreading their deposits across multiple FDIC-insured banks or by opening different types of accounts at the same bank.
Are credit unions insured by the FDIC?
No, credit unions are not insured by the FDIC. Instead, credit unions are insured by the National Credit Union Administration (NCUA), which provides similar insurance coverage to FDIC insurance.
What is the difference between FDIC and NCUA insurance?
While both FDIC and NCUA insurance protect depositors against the loss of their insured deposits if a bank or credit union fails, FDIC insurance covers banks and NCUA insurance covers credit unions.
Can depositors lose money with FDIC insurance?
No, depositors will not lose money on their insured deposits if their bank fails and they have deposits within the insurance limits. The FDIC will ensure that depositors receive their insured funds.
What happens to uninsured deposits in a bank failure?
If a bank fails and a depositor has funds in excess of the insurance limits, the depositor may not recover the full amount of their uninsured deposits. The FDIC will distribute any remaining assets to depositors on a pro-rata basis.