The Federal Deposit Insurance Corporation (FDIC) insures deposits at FDIC-insured banks. This includes savings accounts, money market accounts, checking accounts, and deposits in CDs. FDIC insurance ensures your money is protected in the event of bank failure.
But there is a cap on how much the FDIC can insure and who it protects. You probably already know that this limit is $250,000 per depositor, but some additional rules apply.
If you have a high bank account balance, it’s important to know how much of your money is within the FDIC insured limits. Otherwise, some of your savings could be at risk if your bank fails.
The good news is there are several ways to secure an excess deposit.
Understanding FDIC Limits
The FDIC insures traditional deposit products such as checking, savings, and money market deposit accounts (not money market funds) and certificates of deposit (CDs), as well as cashier’s checks, money orders, and other bank-issued items. These deposits are insured up to $250,000 per depositor, per FDIC insured bank, and per account holder class.
The FDIC does not insure investment products such as stocks, bonds, mutual funds, annuities, and life insurance policies. It also does not extend to the contents of the locker.
To understand FDIC restrictions, you need to understand the different categories of account holders, including: single (one owner), joint (two or more owners), certain retirement accounts such as IRAs or Keogh plans, and revocable and irrevocable trust accounts. The FDIC explains the ownership categories and how they work.
If your deposits exceed the FDIC insured limit of $250,000, discuss with your bank the insurance status of your deposits and your options for in-house insurance on all savings. You may need to spread your funds into separate accounts with co-owners or beneficiaries, or use more than one FDIC-insured bank to insure all your funds.
The FDIC’s electronic deposit insurance estimator can help you figure out how much of your bank deposit is insured.
Maximize your reach with your banking network
If you want to allocate funds to expand your FDIC coverage, a network of banks can do that for you. IntraFi Network Deposit deposits your excess deposits into checking accounts, money market deposit accounts and CDs at individually licensed FDIC banks on its network. IntraFi web deposits utilize certificates formerly known as Certificates of Deposit Account Registration Service or CDARS and Insured Cash Sweeps or ICS.
Likewise, Impact Deposits Corp. provides excess deposit insurance through its network of nearly 200 FDIC-insured community banks. Deposits provide loan funds to these communities, and 2 basis points (1 basis point is one hundredth of 1 percent) of participating bank deposits are donated to local charities.
Consider moving some of your money to a credit union
A credit union can provide a safe haven for excess bank deposits. Although credit unions are not covered by FDIC insurance, they are still protected. The National Credit Union Administration (NCUA) provides deposit insurance up to $250,000 per depositor, per credit union and per property class. You can use NCUA’s Share Insurance Estimator to determine how much of your deposit will be covered.
In addition to being able to insure excess deposits, credit unions can offer several other benefits. For example, you can benefit from higher deposit account interest rates and lower fees compared to traditional banks. You may also find that credit unions offer cheaper loan rates.
If you’re considering opening a credit union account, follow the same process as opening a bank account. That means comparing the fees you’re likely to pay with the interest you’re likely to earn, as well as other features like online and mobile banking access or the size of your ATM network.
Consider other options
If you’re specifically looking for a bank that insures millions of dollars, you might consider an option like MaxSafe. MaxSafe from Wintrust allows depositors to increase their FDIC insurance limit from $250,000 to $3.75 million.
This is 15 times the current limit allowed by FDIC insurance per account. MaxSafe works similarly to CDARS, but instead of investing your money in CDs, you can distribute your money into money market accounts at 15 different institutions. A minimum deposit of $1,000 is required to get started, and there are no monthly maintenance fees or minimum balance requirements.
The Depositors Insurance Fund (DIF) is another way of insuring excess deposits. The program covers deposit account balances at member banks that exceed the FDIC limit of $250,000. So if you exhaust your FDIC coverage limit, you are still protected. There is no need to fill out a form to take advantage of this insurance – you just need to open an account with a DIF member bank.
Open accounts with multiple banks
If you’re willing to take the time and keep track of your accounts methodically, you can easily insure your excess deposits by opening an account with a separately licensed bank to expand your FDIC coverage. Opening accounts at different branches of the same bank will not increase your insurance coverage.
Opening accounts with multiple banks is also a great way to take advantage of some of the best rates on CDs. Consider using multiple banks to create a CD ladder. The best rates on CDs and other deposit accounts are often offered by online banks. It’s easy to open and manage an account online.