Is your money safe in the bank? Here’s how the FDIC has your back
- Apr 7, 2020
- 4 min read
What we'll cover
What FDIC stands for
Important things to know about FDIC insurance
How the SIPC offers protection for investors
With an uncertain economy and market volatility you may worry about the safety of your money in the bank. But, as an Ally Bank customer, rest assured that your deposits are FDIC-insured up to the maximum allowed by law.
What is the FDIC?
The FDIC (Federal Deposit Insurance Corporation) is an agency created by the 1933 Banking Act that was designed to restore trust in the American banking system and protect consumers’ bank deposits. The FDIC was created after the stock market crash of 1929 to protect and insure a person’s money up to a certain amount — even if the bank itself couldn’t cover the withdrawal.
Today, this independent agency of the U.S. government continues to protect your deposits at an FDIC-insured bank or savings association — even in the unlikely event that your bank closes.
What does FDIC insurance protect?
Money in an FDIC-insured bank, like Ally Bank, is protected on a per depositor and per qualifying account ownership category basis up to $250,000 (including principle and accrued interest). FDIC insurance covers deposits such as Interest Checking, Online Savings, Money Market Deposit Accounts and Certificates of Deposit (CDs). Learn more about the full range of deposit products and insurance coverage amounts.
If your account balance is below the $250,000 threshold and you have your money in one of these types of accounts, you are protected — even in the unlikely scenario of your bank closing.
How to increase your amount of FDIC insurance
The FDIC insures up to $250,000 per depositor, per qualifying account ownership category. If your balance exceeds this limit, you may be asking yourself should I withdraw the excess and stash the cash elsewhere? Rest assured, there are ways to significantly expand your insurance protection and maximize your coverage.
Here are a few ways to maximize your coverage:
• Open a joint account with your spouse, which would double the amount covered.
• Start saving for college now by opening a Coverdell Education Savings Account (or Education IRA), which is FDIC-insured as an Irrevocable Trust.
• Save for retirement by stashing your cash in an IRA CD or IRA savings account.
• Add two or more payable on death (POD) beneficiaries to a qualifying account.
• Spread the wealth by opening additional single-name accounts at different FDIC-insured banks. For example, if you open an account at three different institutions, you could have up to $750,000 in FDIC insurance coverage.
This combination of strategies and accounts could provide you with up to an additional $1.25 million in coverage. Learn more about how to estimate your insurance coverage and enhance your deposit protection.
But what about your investment accounts?
As you know, investing in the stock market comes with risk. But even securities accounts can have some protection, thanks to the Securities Investor Protection Corporation (SIPC).
The SIPC is a nonprofit corporation that protects investors against the loss of securities and cash held at SIPC member brokerages if their brokerage fails. It was created as part of the Securities Investor Protection Act of 1970, after the U.S. security market instability of the late 1960s.
You can learn more about the differences between FDIC and SIPC insurance, how you can protect multiple brokerage accounts by the same customer based on separate capacity and the limits of SIPC here .
Check in with your finances
Economic downturns can be stressful to live through. But many financial institutions like Ally Bank have your back, thanks to FDIC insurance.
Instead, to calm your nerves, conduct a financial health check, and start by ensuring that your funds are FDIC-protected. There may be a valid reason to withdraw your money, but burying it in a hole in your backyard should not be one of them.
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