There was a time when people analyzed the integrity and reputation of their local bank; after all, if they went bust, so did your money. The Federal Deposit Insurance Corporation (FDIC) was created during The Great Depression to protect savers and prevent runs on banks. The National Credit Union Administration (NCUA) provides the same coverage for credit unions. So now, if a bank fails, the government will cover $250,000 per account type.

You should make sure your hard-earned money is in a bank account that is insured by either the FDIC or the NCUA, but no more than $250k in a single account in your name, at a single bank. It does not matter whether it is a checking, savings, CD, or money market account. The coverage will be $250k for accounts in your name and $250k for accounts in your spouse’s name. If you have a joint account with your spouse you will be covered up to $500k per institution. Opening different account types or other specifications does not change this limit.

Retirement accounts have an additional $250k covered. However, most people do not want to put cash or cash-like instruments in their tax-deferred accounts. Mutual funds, stocks, and bonds are not covered by FDIC, even if held in the bank’s IRA.

Non-bank companies and fintech

Some fintech companies may offer bank-like products that are FDIC insured. These companies may act as deposit brokers or have contractual arrangements with FDIC insured banks to place their customers’ funds in insured depository accounts at those banks. It is important that you check with which bank your funds have been placed and if it is FDIC-insured. Non-bank companies are never FDIC insured.

Being aware of the differences between FDIC-insured banks, fintech or other non-bank companies will help determine what is best for your needs. Some non-bank companies may appear to be banks because of how they are named or the products they offer.

In an increasingly technology-dependent world, where there seems to be a new banking app every few months, it is imperative that you really understand where your money is and take advantage of the ‘free insurance’ offered.

Adviso Wealth is dedicated to working with people just like you. We want to give you the clarity and confidence you need to achieve your personal and financial goals.

To learn more, visit advisowealth.com or email sweta@demo.advisowealth.com