Dear Carrie: If I have more than $250,000 at any one bank, should I consider using multiple banks to make sure it's all insured to the full $250K? If so, what's the best strategy? -- A Reader
Dear Reader: Even though the pace of bank failures has slowed down, it's always prudent to understand how your deposits are protected -- so thanks for a great question. Created back in 1933 in the wake of the Great Depression, the Federal Deposit Insurance Corporation (FDIC) protects the money you deposit in an insured bank, and it does it well: No one with an FDIC-insured account has lost a penny of insured funds since 1933.
Note the phrase "insured funds." The FDIC doesn't necessarily cover all your money, but it does cover your balance, dollar for dollar, up to $250,000 in a single account. FDIC insurance applies to checking and savings accounts, certain retirement accounts such as an IRA, and certificates of deposit (CDs). It does (SET ITAL) not (END ITAL), however, insure money that you invest in stocks, bonds, mutual funds, exchange-traded funds, insurance policies, annuities, municipal securities or money market funds. It is important to understand the distinctions. For example, many money market funds from broker-dealers have check-writing features, and many users treat these accounts like checking accounts -- but these funds are not FDIC insured.
TWO BANKS? NOT ALWAYS
I'll assume from your question that you have more than $250,000 in your bank. That may be OK, depending on what kind of accounts you have and how they are owned. A single account, owned by one person, is insured up to $250,000. A joint account is insured up to $250,000 (SET ITAL) per owner (END ITAL). An IRA held at an FDIC-insured bank is covered up to $250,000. If you hold another type of account -- such as a trust or corporate account -- check with your bank for the exact limits of your coverage.
As an example, if you and your wife each have $250,000 in individual checking or savings accounts, and you two also have an additional $500,000 in a joint checking or savings account, you're fine. You'll each have $500,000 of FDIC coverage, even if both accounts are at the same bank. But say you have a $100,000 CD and a $250,000 savings account with the same bank, both titled in your name only. In this case, you're only insured up to the $250,000 limit -- so you should think about moving the CD to another insured institution. Most broker-dealers make it easy to find CDs from multiple institutions, and each CD would be insured by each unique bank.
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