What is the FDIC for?

October 3, 2008 · Posted in Banks 

It would likely be safe to assume that almost everyone in the United States has seen the “Member FDIC” signs that are displayed at banking institutions. Even if you don’t have a bank account yourself, you have still probably seen one at least once in your lifetime thus far. The signs are as common in America as hot dogs and apple pie. However, something being extremely common does not mean it is also understood by everyone. If you’re one of those people unsure of what exactly the FDIC is or what it does, read on to find out.

The FDIC stands for “The Federal Deposit Insurance Corporation.” It exists to provide insurance for nearly every banking institution, as well as savings and loan institution. It automatically protects individuals and businesses alike, for up to $100,000, in the event of bank failure. In the case of retirement funds, the FDIC insures up to $250,000. This basically means that if your bank goes the way of the dinosaurs, your money is guaranteed to be safe up to those listed limits. By your bank displaying those “Member FDIC” signs, they are letting you know that they are compliant with the FDIC, so you can feel more confident about letting them handle your money.

As with anything, there are some restrictions, of course. The FDIC does not cover absolutely everything, so certain situations will render the insurance coverage null. The coverage extends to more standard banking procedures, such as checking accounts and savings accounts. It will also cover Money Market Deposit Accounts if yours is one that you can write a small number of checks on a month and Certificates of Deposit that take time to reach maturity.

On the flip side, the FDIC will not cover Treasury bills or other investments backed by the United States government, stocks, bonds or mutual funds. It will not protect your annuity or insurance items, like those for your home or vehicle. Any mistakes made by your bank itself are instead usually covered by their own insurance policies, which is handy because the FDIC doesn’t have those under its protective umbrella. Likewise for any fraud committed by bank personnel.

So, to sum it up: the Federal Deposit Insurance Corporation is an organization that provides you with a means of protecting and recovering losses you may accrue in the event of bank failure, and next time you see one of those “Member FDIC” signs, you’ll know exactly what it means.


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