Breaking News
More () »

What's the FDIC – and how does it keep our bank deposits safe?

After two banks collapsed in the first week of March, many people wondered if the same can occur with their bank and what happens to their money.

ST. PETERSBURG, Fla. — President Joe Biden insisted Monday that the nation’s banking system was safe despite the collapse of two banks that stirred fears among many customers and prompted regulators to offer emergency loans to financial companies to stave off additional failures.

"Your deposits will be there when you need them," Biden said.

U.S. regulators closed the Silicon Valley Bank on March 10 after depositors rushed to withdraw their funds all at once. It was the second largest bank failure in the country's history, behind only the 2008 failure of Washington Mutual.

This led many people across the nation to wonder if the same can happen to their bank — and what will happen to their money.

Chances are that most people's banks are members of the Federal Deposit Insurance Corporation (FDIC), which was created by Congress during the Great Depression to maintain the public's confidence in the country's financial system.

The FDIC also, "insures deposits; examines and supervises financial institutions for safety, soundness, and consumer protection; makes large and complex financial institutions resolvable; and manages receiverships," according to its website.

But how exactly does it keep people's deposits safe? 

The agency says that it protects depositors of insured banks in the U.S. against the loss of their deposits if an insured bank fails. This applies to any person or entity regardless of citizenship or residency to have FDIC insurance coverage from the FDIC in an insured bank.

The government corporation has a standard insurance amount of $250,000 per customer, bank and account ownership, the FDIC said. This means that if a person's bank is a member of the FDIC, the maximum money they can take out is $250,000 if their bank collapses. 

Chances are that most people's banks are covered by the FDIC because the agency says more than 4,700 banks are members as of March 10.

If a customer exceeds the $250,000 insured by the FDIC, they may still qualify to get the rest of the money in the bank.

"The FDIC provides separate insurance coverage for funds depositors may have in different categories of legal ownership," the government corporation says on its website. "The FDIC refers to these different categories as 'ownership categories.'

"A bank customer who has multiple accounts may qualify for more than $250,000 in insurance coverage if the customer's funds are deposited in different ownership categories and the requirements for each ownership category are met."

The following types of accounts are ones that the FDIC may consider in a customer taking out more than the insured limit:

  • Single Accounts
  • Certain Retirement Accounts
  • Joint Accounts
  • Revocable Trust Accounts
  • Irrevocable Trust Accounts
  • Employee Benefit Plan Accounts
  • Corporation/Partnership/Unincorporated Association Accounts
  • Government Accounts

If you're not sure that your bank is covered by the FDIC, you can check using the agency's data tools. 

For those who have deposit accounts with credit unions, the FDIC does not insure them. Instead, most credit unions are covered by the National Credit Union Administration and are also federally insured for up to at least $250,000.

The Associated Press contributed to this report. 

Before You Leave, Check This Out