Protecting Cash Investments: 6 Things To Know About Bank Deposit Insurance

The spate of bank failures since the economy fell apart is a sore reminder of the crucial importance of deposit insurance. Your savings, checking, money market, and CDs are all safe as long as you bank with FDIC-insured institutions and you stay within the coverage limits.

By all means look for the best banks with the highest savings rates, but don't get so caught up in that research you forget to make sure you're fully covered.

Here are six things about FDIC insurance you should know.

1. FDIC Coverage Through 2013

The current coverage limit for your deposits at any bank is $250,000 through Dec. 31, 2013. Unless Congress acts -- and there is talk of extending this coverage amount -- the limit will revert to $100,000 on Jan. 1, 2014. This is important to keep in mind if you invest in long-term CDs now. Will those CDs be covered if the limit goes down?

2. Qualifying for More Coverage on CDs and other Accounts

Your family can qualify for more coverage than the $250,000 limit if you have the money deposited under different ownership categories. Separate $250,000 coverage is allotted for deposits held in your name alone, joint accounts, accounts that name beneficiaries when you die, and certain retirement accounts, according to the FDIC.

3. Double Check Coverage

Use the FDIC's Electronic Deposit Insurance Estimator -- EDIE -- to check your deposit coverage. The tool asks you to provide information about the deposits you have at one bank, including the balances, ownership category, and names of owners and beneficiaries. After you click on "calculate," the estimator reports whether you're covered and, if you're not fully covered, where your deposits exceed the limits. The tool works for most situations, except for complex trust deposits.

4. When in Doubt, Call

Don't assume your money is safe if you have any doubts. Call the FDIC at 1-877-ASK-FDIC or e-mail using the customer assistance form on the FDIC's Web site if you're unsure whether your deposits are covered.

5. Periodically Review Coverage

Check your coverage when your life circumstances change and your deposits are close to the coverage limit. The death of an owner or beneficiary on an account, for instance, could reduce your coverage, the FDIC says. For instance, if you and your spouse own a joint $300,000 account at a bank, the entire amount is covered because each person's share -- $150,000 in this case -- would be covered up to $250,000. If your spouse dies, the FDIC will insure the full amount for six months, but after that, only $250,000 of the $300,000 would be insured. The six months is a grace period to give you time to make the necessary changes to get full insurance coverage.

6. Protect Investments: Get Fully Insured if Coverage Falls Short

Move some of your money to another bank if your deposits exceed the insurance coverage limit, or consider dividing your money among different ownership categories. But make sure you understand the estate-planning consequences if you take the latter step. The FDIC recommends talking to an attorney or finance advisor to decide the right course of action.

Finally, don't forget about deposits at credit unions, which are insured up to $250,000 per person per institution through the National Credit Union Administration. The administration provides its own deposit insurance estimator, the Electronic Share Insurance Calculator on its Web site to check your deposit safety at credit unions.

Money Market Accounts: 6 Things You Should Know Before You Open One

With CD rates having nowhere to go but up, you might be skittish about locking your money up in a certificate of deposit. If that's the case, a money market account could be your best best for earnings and safety.

Money market accounts typically offer higher interest rates than regular savings accounts and rival short-term CD rates. Here are six things you should know before you open an account:

1. Money Market Safety: FDIC Insurance

Are you investing in a money market account or a money market fund? Both are low-risk, liquid investment vehicles that let you write checks from the account and withdraw money at ATMs. You can find both at some banks. So what's the difference? Money market accounts are interest-bearing accounts and qualify for FDIC insurance, now at $250,000 per person per financial institution. That means if the bank fails, your money is safe up to that amount.

Money market funds are mutual funds that invest in short-term fixed-income investments. They tend to feature slightly higher rates than money market deposit accounts, but they don't carry FDIC insurance.

2. Money Market Rates

Compare money market rates among banks in your town and online. Sometimes banks offer bonuses for opening an account, higher introductory rates, and tiered rates depending on the balance you maintain. Understand which rate will be in effect after the introductory period and for the balance you plan to maintain, and make apples-to-apples comparisons between financial institutions.

3. Money Market Access Limits

Money market accounts let you write checks against them, but they're not intended to substitute as checking accounts. Typically these accounts limit withdrawals, transfers to other accounts, and checks to no more than six a month. If you need greater check-writing capability, then consider an interest-bearing checking account. Some high-interest checking accounts rival what you can earn on savings accounts as long as you meet requirements, such as making a certain number of debit card transactions per month.

4. Minimum Deposit and Balance Requirements

Some accounts have no minimum balance requirement, while others require fat balances to qualify for interest earnings. Narrow your choices to the banks offering accounts that fit the amount you plan to invest.

5. Money Market Account Fees

Read the account fine print to get the low-down on fees. Some banks charge a monthly maintenance fee, but waive the fee if you meet certain conditions, such as maintaining a high balance or linking to a checking account with that institution. Check whether there are any fees for transferring money in or out of the account or writing checks.

6. Bank Safety and Service

Consider the financial institution's reputation before you hand over your money. Ask friends and read customer reviews online. Visit a branch to get a feel for customer service if you like banking in person. And comb through the Web site if you plan to bank online. How easy is it open and monitor an account online? What kind of response do you get when you call the customer service number?

Besides offering a safe place to stash your cash while you're waiting for CD rates to rise, a money market account is a good destination for your emergency savings fund, offering greater liquidity than CDs. Shop carefully to find the best account for your investment, and then watch your money grow.


Disclaimer:This content is not provided or commissioned by American Express. Opinions expressed here are author's alone, not those of American Express, and have not been reviewed, approved or otherwise endorsed by American Express. This site may be compensated through American Express Affiliate Program.

Bank Name: Your E-mail: Description (Please include URL):
We HATE spam as much as you, we don't sell your e-mail address!