What Happens If My Bank Fails? (2024)

If your bank fails, the first thing to keep in mind is that you won’t lose all your deposits. The Federal Deposit Insurance Corp. (FDIC) insures bank accounts up to $250,000 per depositor, per account category. So, unless your bank is not insured by the FDIC or you have deposited more than the FDIC limit, your money is safe if your bank fails.

The FDIC will notify you in the case of a bank failure, like the Silicon Valley Bank and Signature Bank closures in March 2023. Your insured deposits will either be moved to another FDIC-insured bank or paid out to you.

Learn more about why banks fail, how FDIC insurance works to help you recoup your money, and how to protect your finances.

Key Takeaways

  • In most cases, a bank failure is the result of owing more to creditors and depositors than what their assets are worth.
  • If your bank fails, up to $250,000 of deposited money (per person, per account ownership type) is protected by the FDIC.
  • When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out.
  • Funds beyond the protected amount may still be reimbursed, but the FDIC does not guarantee this.

Why Do Banks Fail?

Banks typically fail when they become insolvent, or when the value of their assets drop to levels below what they owe to creditors and depositors.

Banks do not keep in a vault all of the cash that is deposited. Instead, those funds are lent out to other customers or used to make investments. Banks can become insolvent, for example, if they make risky investments and market conditions cause them to lose money, or if they lend to people or businesses that don’t meet their obligations.


When customers become aware of a bank’s financial stress, they may rush to withdraw their money out of fear that the bank will fail. This is called a bank run. When too many depositors clear their accounts at once, that can actually cause the bank to fail.

So, What Does Happen If My Bank Fails?

Once a bank can no longer afford to make good on its obligations to customers and creditors, the FDIC steps in. Here’s what typically happens.

  1. The FDIC announces that the bank is closed, and the FDIC is appointed as its receiver so it can help use the bank’s assets to pay depositors and creditors.
  2. In most cases, the FDIC will try to find another banking institution to acquire the failed bank. If that happens, customers’ accounts will simply transfer over to the new bank. You will get information about the transition, and you will likely get new debit cards and checks (if applicable).
  3. If another bank doesn’t take over the assets, the FDIC will send depositors a reimbursem*nt check “as soon as possible.”
  4. The FDIC is not obligated to return funds beyond the $250,000 that is insured, but you still have some recourse if you’ve had more than that in an account category. First, you can request a receiver’s certificate, which lets you claim your funds when the bank’s assets are liquidated.

The best way to avoid losing money if your bank fails is to not exceed the $250,000 FDIC-insured limit. If you have more than that, you can open an account either in another bank, or in the same bank but with a different ownership category (more on ownership categories in the table below).

Examples of Bank Failures

Bank failures are a lot less common since the FDIC started operation in 1934. Before that, thousands of banks failed during the Great Depression—4,000 in 1933 alone. But bank failures still occur. In some cases, broader market trends can trigger bank failures, such as when 25 banks failed in 2008 amid the housing crisis. Banks can fail for other reasons as well, such as internal mismanagement.

Let’s look at some notable bank failures:

  • Silicon Valley Bank and Signature Bank: In what many news outlets called the first social media bank run, Silicon Valley Bank and Signature Bank abruptly closed in 2023. News of their financial troubles spread on platforms like Twitter (now X), causing customers to panic and pull their money.
  • The largest bank failure: Washington Mutual (WaMu) is the largest bank failure in terms of assets. The bank collapsed during the 2008 financial crisis at a time when it had $307 billion in assets. JPMorgan Chase took over WaMu.
  • The last big in-person bank run: Continental Illinois National Bank and Trust Co. was one of the largest U.S. banks when it found itself in financial trouble in 1984. When rumors began to spread, there was a run on deposits at the bank’s branches. Depositors withdrew $10.8 billion.


The number of banks that have failed since 2000, as of April 10, 2023. The FDIC’s Failed Bank List includes details on them.

Do You Lose Any Money If Your Bank Closes?

If your deposits are under the FDIC insurance limits ($250,000 per depositor, per ownership type), then you won’t lose any money if your bank closes. But it’s important to understand what types of accounts are insured, and what the limit means.

Accounts Protected by FDICAccounts Not Protected by FDIC
CheckingStock or bond investments
SavingsMutual funds
Certificates of deposit (CDs)Cryptocurrency
Money marketsLife insurance policies
Negotiable Order of Withdrawal (NOW) accountsAnnuities
Cashier’s checks, money orders, or any bank-issued checkMunicipal securities
Safe deposit boxes
U.S. Treasury bills, bonds, or notes

You also need to pay attention to ownership categories.

FDIC Deposit Insurance Coverage Limits by Account Ownership Category
Single accounts (owned by one person)$250,000 per owner
Joint accounts (owned by two or more people)$250,000 per co-owner
Certain retirement accounts (includes IRAs)$250,000 per owner
Revocable trust accounts$250,000 per owner, per unique beneficiary
Corporation, partnership, and unincorporated association accounts$250,000 per corporation, partnership, or unincorporated association
Irrevocable trust accounts$250,000 for the noncontingent interest of each unique beneficiary
Employee benefit plan accounts$250,000 for the noncontingent interest of each plan participant
Government accounts$250,000 per official custodian (more coverage may be available in certain situations)

If you have bank accounts with credit unions, those funds are protected by the National Credit Union Administration (NCUA), which federally insures credit unions.

What If You Have Multiple Accounts?

If you have multiple accounts at one bank, such as an individual checking account and savings account in the same bank with a total of $300,000, then FDIC insurance won’t fully protect you. It only insures up to $250,000 per depositor per account ownership type. You could lose $50,000 because, in this case, the accounts are in the same ownership category.

However, if you had a joint checking account with your spouse and your own savings account, then FDIC insurance would fully protect you because joint accounts and individual accounts are two different ownership categories.

Even if you had more than the $250,000 limit deposited, you might not lose any of your funds. If another bank takes over, your money will simply transfer there. An example of this can be seen in the failure of First Republic Bank and its subsequent purchase by JP Morgan Chase in May of 2023. If not, the federal government may cover the remainder of your funds, as it offered to do after the Signature Bank and Silicon Valley Bank failures. Ultimately, all customer assets were protected when Flagstar Bank took over Signature Bank, and .

Who Takes Over a Failed Bank?

When a bank fails, another bank will commonly take over the assets. When this happens, depositors and/or borrowers of the failed bank will automatically become customers of the new bank. If the FDIC doesn’t find another bank to take over, it will send out checks for the insured deposit amounts, typically within a few days.

When a Bank Fails, Where Does Insured Money Come from?

The FDIC maintains the Deposit Insurance Fund (DIF), which it can draw from if it needs to pay out insured balances if a bank fails. That fund is also used to help resolve failed banks. The DIF is funded by insurance premiums that banks pay called assessments, as well as from interest earned on investments in U.S. government obligations.

What Happens to My Direct Deposits If My Bank Closes?

What happens to your direct deposits when your bank fails depends on the fate of the failed bank. If another bank takes over, your direct deposits will automatically redirect to the new bank. If there is no acquiring bank, then the FDIC will try to find an institution to temporarily handle direct deposits, mainly so Social Security recipients do not experience any delays. Impacted customers will be updated about any changes to their direct deposits.

What Happens to Checks and Automatic Payments That Have Not Cleared an Account Before My Bank Is Closed?

If your bank fails and you have checks that didn’t clear or automatic payments set up, you will be responsible for working with your creditors and lenders to make alternate payment arrangements. Your originally scheduled payment will be returned unpaid with a notation that your bank is closed. However, this will not impact your credit as long as you set up an alternate payment method.

Can I Access My Safe Deposit Box If My Bank Closes?

Safe deposit boxes are physically kept in a bank branch, and you can usually retrieve the contents the day after the bank closure. If another bank acquires your bank, your branch should reopen the next business day, and you can remove your items at that time. Otherwise, the FDIC will send you a letter with instructions for how to get your items.

The Bottom Line

Though bank failures get a lot of media attention, customer finances are usually not severely impacted. As long as you do business with an FDIC-insured institution and keep less than $250,000 per account ownership category, your funds will be safe if your bank fails. However, you might face some minor inconveniences, such as waiting for a new debit card or updating your automatic payments.

What Happens If My Bank Fails? (2024)


What Happens If My Bank Fails? ›

If your bank fails, up to $250,000 of deposited money (per person, per account ownership type) is protected by the FDIC. When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out.

What happens to your money if the bank fails? ›

When there is no open bank acquirer for the deposits, the FDIC will pay the depositor directly by check up to the insured balance in each account. Such payments usually begin within a few days after the bank closing.

Should I be worried about my bank failing? ›

“In theory, your money is safe,” Pendergast says. “But that's a bit like saying your house is safe during an inferno if you have fire coverage. It's not a stress-free process to go through.” The main cause for worry during a bank failure would be if the total of your deposits exceeds the FDIC coverage limit.

Can banks seize your money if 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 does the FDIC do when your bank fails? ›

Historically, the FDIC pays insurance within a few days after a bank closing, usually the next business day, by either (1) providing each depositor with a new account at another insured bank in an amount equal to the insured balance of their account at the failed bank, or (2) by issuing a payment to each depositor for ...

Who gets paid when a bank fails? ›

By law, after insured depositors are paid, uninsured depositors are paid next, followed by general creditors and then stockholders. In most cases, general creditors and stockholders realize little or no recovery.

Are credit unions safer than banks? ›

Generally, credit unions are viewed as safer than banks, although deposits at both types of financial institutions are usually insured at the same dollar amounts. The FDIC insures deposits at most banks, and the NCUA insures deposits at most credit unions.

Should I pull my money out of the bank? ›

A bank account is typically the safest place for your cash, since banks can be insured by the Federal Deposit Insurance Corp. up to $250,000 per depositor, per insured institution, per ownership category.

How safe are the banks right now? ›

Most deposits in banks are insured dollar-for-dollar by the Federal Deposit Insurance Corp. This insurance covers your principal and any interest you're owed through the date of your bank's default up to $250,000 in combined total balances. You don't have to apply for FDIC insurance.

Can I withdraw 1 million from my bank? ›

Unless your bank has set a withdrawal limit of its own, you are free to take as much out of your bank account as you would like. It is, after all, your money.

Is Bank of America safe from collapse? ›

Bank of America is just one place below JPMorgan Chase on both the 2023 G-SIBs list and the Federal Reserve's list of the largest U.S. banks, which is why it was chosen in our research as one of the safest banks.

Can a bank refuse to give me my money? ›

Yes. Your bank may hold the funds according to its funds availability policy. Or it may have placed an exception hold on the deposit.

Can banks take your money in a depression? ›

If you have money in a checking, saving or other depository account, it is protected from financial downturns by the FDIC.

Has anyone ever lost money at an FDIC insured bank? ›

No depositor has ever lost a penny of insured deposits since the FDIC was created in 1933. The FDIC official sign -- posted at every insured bank and savings association across the country -- is a symbol of confidence for Americans.

What happens to safe deposit boxes when a bank closes? ›

The FDIC does not insure the contents of safe deposit boxes at banks. If your bank fails, you likely will be able to retrieve the contents of your safe deposit box. If another bank acquires your bank's branches, you can contact that bank to ask about accessing your safe deposit box.

What was the largest bank failure in US history? ›

The largest bank failure ever occurred when Washington Mutual Bank went under in 2008. At the time, it had about $307 billion in assets. During the uncertainty of the banking crisis, however, Washington Mutual experienced a bank run where customers withdrew almost $17 billion in assets in less than 10 days.

Can the FDIC run 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.

What happens to my mortgage if my bank collapses? ›

Your mortgage will likely be sold to another financial institution. If so, the new owner must communicate this change to you within 30 days of the transfer date, according to the Consumer Financial Protection Bureau (CFPB).

How much of your money is protected in a bank? ›

We protect certain qualifying temporary high balances up to £1 million for six months from when the amount was first deposited. See more details and frequently asked questions on our banks and building societies protection page. You don't need to do anything – FSCS will compensate you automatically.


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