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Consumers Should Know FDIC Insurance Rules To Protect Their Money

If this blog is about one subject, it is about how to protect yourself... your identity information and your money. Back in May, I wrote about FDIC insurance, but it seems necessary to write about it again. There is an excellent article by Suze Orman at the CNBC Web site about, "What You Need To Know About FDIC Insurance."

Understanding FDIC insurance is important because you do not want to get burned. You do not want to repeat the mistake of the consumers who lost money in the recent IndyMac bank failure. Their mistake: they kept more money in their bank accounts than was insured by the FDIC. So when the bank failed, those consumers will lose money because the FDIC will pay only the amount insured and only half of any amounts over the insurance limit. Orman's article explains how the FDIC insurance limits work:

"The rule is that the combined assets of all accounts that are in one person’s name can not exceed $100,000. It’s $100,000 per depositor per bank. Not $100,000 per account."

Orman's article provides examples, which make it easy to understand since we all have different types of bank accounts: savings, CDs, IRAs, and so forth. I highly recommend that everyone read Orman's article. If you have more than $100,000 in the bank, you should split it up among several banks, not in different branches of the same bank:

"If you have an account(s) in just one name at any one bank, make sure you keep less than $100,000 in total at that bank in just your name. That’s what I do. And please don’t make the mistake of investing $100,000 at Big Bank’s branch in downtown and then another $100,000 at its branch out at the mall, or even in a different state. It doesn’t work that way. The FDIC will say you have $200,000 at one bank."

This also means, when banks merge, you may have to shift around your money. If you and another person (e.g., spouse, child, parent, brother, sister, etc.) have a joint account:

"The FDIC will fully cover a joint account for up to $200,000, meaning you and your co-owner would be eligible for $100,000 each of full coverage. That $100,000 of coverage you each get for the joint account(s) is in addition to the $100,000 you each also get from the bank for accounts that are in your name only."

If you have an IRA at your bank:

"If you have an IRA account at the same bank as your other accounts, the IRA is fully insured by the FDIC up to $250,000. That $250,000 is in addition to the coverage discussed above."

Orman provides clear instructions for you to determine how safe your money at your bank:

"To be super safe I recommend everyone go to the FDIC website and take the time to use their Electronic Deposit Insurance Estimator (EDIE). This free tool will show you exactly what is and is not insured in your personal bank accounts. Click the WALK ME THROUGH button at the bottom of the page and you are on your way to knowing exactly how safe your money is."


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The rules were revised Sept 26th. The interim rules ignore "qualifying party", and place a limit of $500,000 for joint accounts. Accounts including nieces, nephews, cousins, friends and even charities can now be covered.


how long do they have to pay it back and what would be there means?



My understanding is that the FDIC has 99 years to pay back a consumer. I haven't read yet the amended law.

George Jenkins

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