Here’s How Deposit Insurance Keeps Bank Accounts Safe—Even If Its Funding Runs Dry (2024)

Even in the wake of several spectacular bank failures that have diminished the funds that backstops deposit insurance, the average bank customer shouldn’t worry too much about losing their money in the event of more banking chaos, experts say.

Key Takeaways

  • About half of U.S. adults are worried about whether their insured deposits are still safe after recent bank collapses.
  • At the end of 2022, the FDIC's Deposit Insurance Fund had $128.2 billion, equal to 1.27% of all the deposits insured by the government.
  • Since then, three banks have collapsed, costing the fund a total of $35.5 billion.
  • The fund can continue paying even if it goes into the red, but the debt ceiling fight may complicate that process.

After several highly publicized bank collapses—including the second, third, and fourth-largest ones in history—many bank customers are starting to wonder if their money is truly safe. A Gallup poll last week found that about half of U.S. adults were worried about the safety of the money they’d stashed in banks and other financial institutions.

According to the Federal Deposit Insurance Corporation, those worries are misplaced—the FDIC guarantees deposits up to $250,000, far more than most individual customers have in their accounts.

Still, the FDIC itself doesn’t have unlimited money. If enough banks flounder at once, it could deplete the fund that backstops deposits. However, experts say even in that event, bank patrons shouldn’t worry about losing their FDIC-insured money.

When a financial institution like Silicon Valley Bank fails, the FDIC steps in to get insured depositors all their money back. To do this, it uses the Deposit Insurance Fund, which is paid for by banks themselves. At the end of 2022, the fund had $128.2 billion, equal to 1.27% of all the deposits insured by the FDIC.

Since then, bailing out depositors at Silicon Valley and Signature banks in March cost a total of $22.5 billion, and the First Republic bank rescue in April is likely to cost about $13 billion according to the FDIC.

With costs quickly mounting, it’s easy to imagine a scenario where a cascade of bank failures, especially if they’re larger banks, exhausts the fund completely. Fortunately for depositors, the fund can continue paying even if it goes into the red, as happened in the wake of the great financial crisis in 2009—the law allows the FDIC to borrow up to $100 billion from the U.S. Treasury.

That option might not be available, however, if the bank failures coincided with a breach of the debt ceiling, which could hobble the government’s ability to borrow and lend money.

If the government were to default on its debt, the U.S. have bigger worries than the health of the Deposit Insurance Fund.

“We're going to be worrying about Social Security getting paid, and whether the federal government will have to pay more to borrow money for the rest of eternity,” said David Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the nonpartisan Brookings Institution think tank.

In that event, one last institution could still come to the rescue: the Federal Reserve, which, during the financial crisis of 2008, gave “blank check” lending totaling $1 trillion at its peak into the financial system to keep it from collapsing completely.

“The Federal Reserve spent a lot of money that it created itself during the great global financial crisis,” Wessel said. “So if it gets to a point where some humongous bank like Bank of America or JPMorgan fails, which would be devastating, we have evidence now that the Fed will step in.”

Creating a large amount of money out of thin air would stoke inflation down the road, meaning that in the end, the cost of those bank failures would be borne by everyone in the form of higher prices.

The bottom line according to Wessel: money in banks is likely safe so long as it’s protected by the FDIC deposit insurance which—for the moment—covers accounts up to $250,000.

“If I had more than $250,000, I don't think I'd put it in one bank,” Wessel said.

Here’s How Deposit Insurance Keeps Bank Accounts Safe—Even If Its Funding Runs Dry (2024)


What's covered by deposit insurance and how do you keep your money safe? ›

FDIC insurance is backed by the full faith and credit of the U.S. government. The FDIC insures up to $250,000 per depositor, per FDIC-insured bank, per ownership category. This guarantees consumers that their money is safe if a bank fails, as long as your balances are within the limits and guidelines.

How does the FDIC help you feel safer about your money deposits in the bank? ›

FDIC deposit insurance protects your money in deposit accounts at FDIC-insured banks in the event of a bank failure. Since the FDIC was founded in 1933, no depositor has lost a penny of FDIC-insured funds.

Who protects your money in deposit accounts if the bank fails? ›

A: The FDIC (Federal Deposit Insurance Corporation) is an independent agency of the United States government that protects bank depositors against the loss of their insured deposits in the event that an FDIC-insured bank or savings association fails.

Is it true that if the bank account is FDIC-insured your money is safe even if the bank fails? ›

In the unlikely event of a bank failure, the FDIC acts quickly to protect insured depositors by arranging a sale to a healthy bank, or by paying depositors directly for their deposit accounts to the insured limit.

Can banks seize your money if the economy fails? ›

Banking regulation has changed over the last 100 years to provide more protection to consumers. You can keep money in a bank account during a recession and it will be safe through FDIC and NCUA deposit insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.

What are the disadvantages of a safe deposit box? ›

Cons. Limited access: You can only access your safe deposit box during the institution's business hours. Fees: There's a yearly fee associated with maintaining a box. Other options, such as home safes, have only a one-time cost.

What are three things not insured by FDIC? ›

The FDIC does not insure:
  • Stock Investments.
  • Bond Investments.
  • Mutual Funds.
  • Crypto Assets.
  • Life Insurance Policies.
  • Annuities.
  • Municipal Securities.
  • Safe Deposit Boxes or their contents.

Is the FDIC good or bad? ›

Making sure your bank is FDIC-insured can help protect your money. FDIC insurance doesn't protect against all problems you might have with a bank, but it at least keeps you from losing the insured money you entrusted to it in the first place, as long as the bank is insured.

What to do if you have more than 250k in the bank? ›

How to Insure Bank Deposits Over $250,000
  1. Open an Account at a Different Bank. FDIC coverage limits are per bank. ...
  2. Add a Joint Account Owner. ...
  3. Split Funds Between Ownership Categories. ...
  4. Use a Network Bank.
Jul 20, 2023

What banks are in danger of failing? ›

7 Banks to Dump Now Before They Go Bust in 2023
SHFSSHF Holdings$0.50
WALWestern Alliance$27.32
ECBKECB Bancorp$11.24
PACWPacWest Bancorp$5.97
FFWMFirst Foundation$4.35
2 more rows
May 8, 2023

What happens to my CD if the bank fails? ›

The FDIC Covers CDs in the Event of Bank Failure

But the recent regional banking turmoil may have you concerned about your investment in case of a bank failure. CDs are treated by the FDIC like other bank accounts and will be insured up to $250,000 if the bank is a member of the agency.

What happens if FDIC runs out of money? ›

Still, the FDIC itself doesn't have unlimited money. If enough banks flounder at once, it could deplete the fund that backstops deposits. However, experts say even in that event, bank patrons shouldn't worry about losing their FDIC-insured money.

Can you lose money in an FDIC insured account? ›

FDIC insurance is backed by the full faith and credit of the United States government. Since the FDIC began operations in 1934, no depositor has ever lost a penny of FDIC-insured deposits.

Do rich people worry about FDIC? ›

Millionaires don't worry about FDIC insurance. Their money is held in their name and not the name of the custodial private bank. Other millionaires have safe deposit boxes full of cash denominated in many different currencies.

What is the downside of FDIC? ›

Cons. Now, for the minuses: Money that exceeds the limit won't be covered. Should you have more than $250,000 in all the insured deposit accounts with a bank, keeping it all in one place doesn't make sense.

Is it safe to keep money in a safe deposit box? ›

A safe deposit box is not a deposit account. It is storage space provided by the bank, so the contents, including cash, checks or other valuables, are not insured by FDIC deposit insurance if damaged or stolen. Also, financial institutions generally do not insure the contents of safe deposit boxes.

What is the safest way to protect your money in a bank? ›

Key Takeaways. Savings accounts are a safe place to keep your money because all deposits made by consumers are guaranteed by the FDIC for bank accounts or the NCUA for credit union accounts. Certificates of deposit (CDs) issued by banks and credit unions also carry deposit insurance.

How do I protect my bank deposits? ›

Here are seven of the best ways to insure excess deposits that you may have.
  1. Understand FDIC limits. ...
  2. Use bank networks to maximize coverage. ...
  3. Open accounts with different ownership categories. ...
  4. Open accounts at several banks. ...
  5. Consider brokerage accounts. ...
  6. Deposit excess funds at a credit union.
Feb 29, 2024

How do I protect cash over my FDIC limit? ›

How to Protect Large Deposits over $250,000
  1. Open Accounts at Multiple Banks. ...
  2. Open Accounts with Different Owners. ...
  3. Open Accounts with Trust/POD [pay-on-death] Designations. ...
  4. Open a CD Account, or Money Market Account, with a bank that offers IntraFi (formerly CDARs) services.
Mar 17, 2023


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