During the last few months, many Americans have started worrying about the security of their money as there have been many bank closures and many more on the FDIC watch list. With that being said, many of us are asking ourselves if we should be keeping all of our money with one bank. What happens if that bank fails, and how much FDIC insurance do I have?
First of all, I will address what will happen if your bank fails. In the event of a bank failure, the FDIC will assume control of the bank and attempt to sell the bank and its assets to a larger financial institution that can safely assume the risk associated with the failed bank. If the FDIC cannot find a suitable buyer, it will then proceed disbursing funds, up to the insured limits, back to the customers of the failed institution. The disbursement of these funds is usually a quick process, but can become lengthy if your banking relationship is very complex.
Next I will discuss your FDIC insurance coverage. There are many Americans that are not informed of the new FDIC insurance rules. Many people believe that if you cannot have more than $100,000 in one bank or you are not insured. This is completely incorrect. Recently, the FDIC coverage limits were increased to $250,000; however, that is not the maximum coverage you can have at one bank. It is easily possible to cover well over one million dollars at the same financial institution. Explaining how this is possible can become very complex, but there is a simple way to determine your FDIC insurance coverage.
The easiest way to determine your FDIC insurance coverage is to discuss it with a banker at your financial institution. Most financial institutions have a few resources at their disposal to calculate your coverage. One of the main resources used is an online FDIC insurance calculator provided by the FDIC itself. This calculator uses the balances of your accounts at that financial institution and allocates them into the appropriate ownership categories to determine your coverage amount. If you prefer, you can use this tool at home at https://www.fdic.gov/EDIE/index.html, but I recommend having a financial professional run this calculation for you.
So, should you keep all your money in the same bank? If you are asking this question simply because you are worried about the safety of your money in the event your bank fails, then the answer is that you can safely keep all your money in the same bank as long as you have not accumulated well over one million dollars in cash.