Facebook Email icon An envelope. It indicates the ability to send an email.
Email Twitter icon A stylized bird with an open mouth, tweeting.
Twitter LinkedIn icon
LinkedIn Link icon An image of a chain link. It symobilizes a website link url.
Copy Link lighning bolt icon An icon in the shape of a lightning bolt.
Save Article Icon A bookmarkAffiliate links for the products on this page are from partners that compensate us and terms apply to offers listed (see our advertiser disclosure with our list of partners for more details). However, our opinions are our own. See how we rate banking products to write unbiased product reviews.
Whenever a bank fails, anyone with savings might reasonably wonder: What happens if my bank fails?
While there's no reason to expect it, this is where the FDIC comes in. Having an FDIC-insured account means your money is protected, even in the event of a bank failure. We've provided information on what the FDIC is, how the FDIC insures bank deposits, what's covered under FDIC insurance.
Compare Today's Rates
The FDIC, which stands for Federal Deposit Insurance Corporation, is an independently run U.S. agency. It protects consumers' deposits in the event a bank or savings association fails. In doing so, the FDIC's primary goal is to maintain stability in the economy while boosting public confidence in the U.S. financial system.
"One of the biggest things is to remember that deposit insurance is paid for by the banks and protects depositors in the unlikely event that their bank fails," says Julianne Breitbeil, a senior media relations officer at the FDIC. "It's not personal insurance for miscellaneous losses."
While the FDIC operates independently, when you deposit money in an FDIC-insured account, it's the U.S. government that guarantees your money will always be accessible.
Congress established the FDIC in 1933 in response to the staggering number of bank failures during the Great Depression. Today, the FDIC insures more than 4,500 financial institutions and helps keep money safe in banks during recessions.
Although the FDIC is the one insuring your money, the funds actually come from the banks that are FDIC-insured. The FDIC will pay insurance to account holders with deposit accounts up to the insured limit. All of the best banks — in fact, most of the banks that are worth banking with — are FDIC-insured.
When you have a deposit account at an FDIC-backed bank — such as a savings account, checking account, money market account, or certificate of deposit — your deposits are backed up to at least $250,000 per bank, per person, per account type. You don't need to sign up for FDIC insurance. If it's an FDIC-backed bank, you're automatically covered up to that amount.
If you have more than $250,000 in an account, there are things you can do to protect the excess funds.
By spreading funds among multiple FDIC-insured banks, you can insure all of your funds beyond the FDIC's $250,000 limit. So, say you receive a $325,000 inheritance. You can keep up to $250,000 at your current bank and open an account at a different bank for the remaining $75,000. The only downside to this strategy is that you'll have to keep track of multiple accounts at different banks.
The Certificate of Deposit Account Registry Service (CDARS) allows you to access FDIC insurance on large deposits. With CDARS, you can access millions of dollars of FDIC coverage on your CDs. The way it works is you invest your money with a CDARS network member and the money is divided into CDs issued by different CDARS banks.
Putting some of your money in a credit union is another good way to protect yourself. Similar to the FDIC, the National Credit Union Association insures credit union deposits up to $250,000 per account holder, per ownership category.
A single account under your name alone is insured up to $250,000. But if you open a joint account with two or more owners, the funds are insured up to $500,000. So you can double the amount insured in your accounts by adding a joint owner.
Another way to protect your money is by opening accounts with different ownership categories. FDIC insurance applies per owner and ownership category. For instance, let's say you have a personal account with $250,000 and a business account with $100,000 at the same bank. Both accounts would be covered because each is under a different category.
The FDIC covers deposit accounts and some transfer services. This includes:
The FDIC doesn't insure investments, insurance, and some other money transfer services. Some excluded accounts and services are:
An exception to PayPal is when you add money to your PayPal account using direct deposit. In this case, that money will be eligible for what's known as FDIC pass-through insurance.
When you buy cryptocurrency or add money to your Venmo account using remote capture or direct deposit, funds from your Venmo balance also can be backed up by FDIC pass-through insurance.
Although funds in a payment platform such as Venmo or PayPal aren't typically backed by the FDIC, there might be exceptions, so be sure to comb over the fine print.
While the role of the FDIC in bank failures is important, that's not the only role the FDIC plays. It provides a number of functions to keep banks accountable and consumers' money safe:
The FDIC is primarily funded through premiums paid by covered banks. The amount each bank has to pay is determined by how risky it is to cover. The FDIC also makes money through investing in things like treasury bonds. It is not funded through taxes.
The FDIC has to keep some funds on hand so it can pay out insurance if banks fail. That on-hand amount is called the deposit insurance fund. The FDIC tries to keep money worth 2% of total insured funds in the DIF. The FDIC publishes how much money is in the DIF in its Quarterly Banking Profile.
The primary difference between FDIC and NCUA insurance is what financial institutions they cover. The FDIC only oversees banks and savings associations. With the FDIC, you're covered for $250,000 per person, per account type, and per bank. If you already use a bank, it's probably covered by the FDIC.
In comparison, the National Credit Union Administration oversees credit unions but otherwise is pretty similar. It's also government-run, and it also provides $250,000 coverage per person, per account type, and per institution. And just like the FDIC, most credit unions in the US are covered by the NCUA.
There aren't any strong reasons to prefer FDIC insurance over NCUA insurance, or vice versa. If you're wondering if you should go with a credit union vs a bank, you'll have to use another metric.
To find out if your financial institution is FDIC-insured, you can ask a bank representative, look for the FDIC sign at your bank, or you can use the FDIC's BankFind tool, explains Breitbeil.
This tool lets you access specific information about FDIC-backed banks, such as the current operating status, its website, branch locations, and the regulator to reach out to for more information or help.
The FDIC helps people keep confidence in banks by ensuring they don't need to worry about losing money in accounts that are advertised as risk-free. With the FDIC, people don't need to worry about their bank collapsing and leaving them with nothing.
The FDIC's ease for depositors, government backing, and transparency all help Americans feel assured that their money is covered and that the FDIC won't fail the same way that banks might.
Bank runs are what happens when a large amount of people fear that their bank is about to fail, so they pull all their money out of the bank at once so they don't lose it. Since banks' funds aren't 100% liquid, banks generally don't have enough money on hand to completely pay out the majority of customers' accounts. So, if a bank run happens, banks generally aren't able to pay for it.
This means that, even if a bank wasn't going to fail, a bank run might very well cause it to.
Since most people don't have more than $250,000 in their bank accounts, the FDIC prevents bank runs by keeping people from worrying they'll lose their money if they don't act fast. This means that banks are less likely to fail overall.
What does the FDIC insure? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
The FDIC insures deposits at member banks up to $250,000 for a single-owner account and $500,000 for a joint account. This is per-bank and per-account type.
How can I tell if my bank is FDIC-insured? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
Banks will generally list if they're FDIC-insured on their websites, but if you can't see anything mentioning it, you can also call and ask the bank directly. You can also use the FDIC's BankFind tool.
What happens if my bank fails? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
If an FDIC-insured bank fails, the FDIC will either provide you with a new account at another insured bank or reimburse you for the insured amount.
Does the FDIC cover investments like stocks and bonds? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
No, the FDIC only insures deposit accounts, such as savings accounts, checking accounts, money market accounts, and certificates of deposit.
How is the FDIC funded? Chevron icon It indicates an expandable section or menu, or sometimes previous / next navigation options.
The FDIC is funded through premiums paid by member banks and savings associations. It is not funded through your taxes.
Jackie Lam is a personal finance writer and is based in Los Angeles. She is an accredited AFC® financial counselor. Jackie is passionate about helping artists, freelancers, and gig economy workers with their finances. She has in-depth experience writing about budgeting, investing, frugality, money, and relationships, and loves finding interesting stories that revolve around money. She is the 2022 recipient of Money Management International's Financial Literacy and Education in Communities (FLEC) Award and the 2022 Plutus Awards recipient for Best Freelancer in Personal Finance Media. In her spare time she enjoys volunteering, water aerobics, sticker collecting, being in nature, and learning the drums. You can connect with her on Instagram or Twitter.
Read more Read lessJamie Johnson is a Kansas City-based personal finance writer whose work has been featured on several of the top finance and business sites in the country, including Insider, Credit Karma, Bankrate, Rocket Mortgage, Fox Business, Quicken Loans, and The Balance. For the past five years, she's dedicated more than 10,000 hours of research and writing to more than 2,000 articles about personal finance topics.
