How Safe Is My Bank?
In today’s deepening recession, it’s no wonder why man investors want to know how safe his/her bank is. There’s one thing that you have to keep in mind though when you’re doing your banking and that is to make sure that your bank is FDIC insured. As long as your bank is FDIC insured, the government will protect your deposits of up to $250,000. Keep in mind that this $250,000 is only extended until December of 2009 when it will go back down to $100,000.
Now the question is, how do I know if my bank is safe?
The first step you want to take when you want to know how safe your bank is by visiting Bankrate.com’s safe and sound rating page. This rating will allow you to explore any bank or credit union in the United States. The ratings here are based on a few categories, which I’ll explain now.
Asset quality - This assesses the loans in a bank’s portfolio. The safe and sound rating will focus deeper on how man of these loans are risky or delinquent.
Capitalization - This term measure how much of the company’s assets are owned either by the company or the shareholders.
Earnings- This is the difference between the revenues and the expenses. It will show exactly how profitable a bank truly is.
Liquidity - This term will measure how well a bank can meet it’s day to day expenses.
Now, once Bankrate factors in all of these conditions, you will get a star rating based out of five. The higher the star rating, the better the bank is off. You have to remember though that this rating can change quickly, so make sure you check out your bank’s stability at least every few months.
Banks across America fail each year. As long as your bank is FDIC insured, you’ll have nothing to worry about as long as your deposits are under the deposit protection limit. If you don’t know if your bank is FDIC insured, use this BankFinder tool provided to you by the FDIC.
If you do have over the deposit limit that would be protected, this limit is based on a bank by bank basis. This means that if you have $150,000 in Bank A, you can take that leftover $50,000 and place it in Bank B and all of your deposits will be protected.
In the end, as long as you follow these tips, it should give you a great understanding on how your bank is currently doing. Explore those websites and if you have more money in your accounts that can be protected, then I would recommend you move it immediately. If not, sit back, relax and check the ratings here and there to check up on your bank.