Is my money safe? What you need to know about bank failures (2024)

NEW YORK (AP) — Recent turmoil in the banking industry may have you worried about your money.

The collapses earlier this year of Silicon Valley Bank and Signature Bank, which catered mostly to the tech industry, were the second- and third-biggest bank failures in U.S. history.

Now there are concerns about a third bank, First Republic Bank. Shares tumbled earlier this week after the bank revealed that depositors withdrew more than $100 billion in the wake of the Silicon Valley Bank collapse.

A report Friday from the Federal Reserve found that Silicon Valley Bank failed due to a combination of extremely poor bank management, weakened regulations and lax government supervision.

After Silicon Valley Bank and Signature Bank failed, regulators stepped in to guarantee all deposits at the two banks and created a program to help shield other banks from a run on deposits.

Here’s what you need to know:

IS MY MONEY SAFE?

Yes, if your money is in a U.S. bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you’ll get your money back.

Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch.

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Credit unions are insured by the National Credit Union Administration.

If you have over $250,000 in individual accounts at one bank, which most people don’t, the amount over $250,000 is considered uninsured and experts recommend that you move the remainder of your money to a different financial institution, said Caleb Silver, editor in chief of Investopedia, a financial media website.

If you have multiple individual accounts at the same bank, for example a savings account and certificate of deposit, those are added together and the total is insured up to $250,000. (Read on for more about how joint accounts are protected.)

Federal officials have been taking steps to make sure other banks aren’t impacted.

“You shouldn’t be too concerned about your money if it’s in one of the bigger banks, and even in some of the regional banks and the credit unions,” Silver said.

ARE THERE RED FLAGS I SHOULD LOOK FOR WITH MY BANK?

If you are worried about your bank closing in the near future, there are some things you can watch out for, according to Silver:

— Watch the stock price.

— Keep an eye on the quarterly and annual reports from your bank.

— Start a Google alert for your bank in case there are news stories about it.

You want to make sure you pay close attention to the way your bank is behaving, Silver said.

“If they’re trying to raise money through a share offering or if they’re trying to sell more stock, they might have trouble on their balance sheet,” said Silver.

Public companies, including banks, do sell shares or issue new ones for various reasons, so context matters. First Republic did so this year when the hazards it faced were well known, and it kicked off an exodus of investors and depositors.

SHOULD I LOOK FOR ALTERNATIVES?

If you have more than $250,000 in your bank, there are a few things you can do:

— Open a joint account

You can protect up to $500,000 by opening a joint account with someone else, such as your spouse, said Greg McBride, chief financial analyst at Bankrate, a financial services company.

“A married couple can easily protect a million dollars at the same bank by each having an individual account and together having a joint account,” McBride said.

— Move to another financial institution

Moving your money to other financial institutions and having up to $250,000 in each account will ensure that your money is insured by the FDIC, McBride said.

— Do not withdraw cash

Despite the recent uncertainty, experts don’t recommend withdrawing cash from your account. Keeping your money in financial institutions rather than in your home is safer, especially when the amount is insured.

“It’s not a time to pull your money out of the bank,” Silver said.

Even people with uninsured deposits usually get nearly all of their money back.

“It takes time, but generally all depositors — both insured and uninsured — get their money back,” said Todd Phillips, a consultant and former attorney at the FDIC. “Uninsured depositors may have to wait some time, and may have to take haircut where they lose 10 to 15% of their savings, but it’s never zero.”

HOW LONG DOES IT TAKE FOR INSURED MONEY TO BE AVAILABLE IF A BANK FAILS?

Historically, the FDIC says it has returned insured deposits within a few days of a bank closing. The FDIC will either provide that amount in a new account at another insured bank or issue a check.

HOW MUCH MONEY CAN BE INSURED IN JOINT ACCOUNTS?

If you have a joint account, the FDIC covers each individual up to $250,000. You can have both joint and single accounts at the same bank and be insured for each.

So if a couple each has individual accounts and a joint account where they have equal withdrawal rights, they can each have up to $250,000 insured in their single accounts and up to $250,000 in their joint accounts. That means each of them will have up to $500,000 insured.

WHAT ABOUT OTHER INVESTMENTS?

Customers should take a close look at the types of investments they have in their bank to know how much of their assets are insured by the FDIC. The FDIC offers an Electronic Deposit Insurance Estimator, a tool to know how much of your money is insured per financial institution.

FDIC deposit insurance covers:

— Checking accounts — Negotiable Order of Withdrawal (NOW) accounts — Savings accounts — Money Market Deposit Accounts (MMDAs) — Certificates of Deposit (CDs) — Cashier’s checks — Money orders — Other official items issued by an insured bank

FDIC deposit insurance doesn’t cover:

— Stock investments — Bond investments — Mutual funds — Life insurance policies — Annuities — Municipal securities — Safe deposit boxes or their contents — U.S. Treasury bills, bonds, or notes — Crypto assets

HOW DOES A CREDIT UNION COMPARE TO A BANK?

Both credit unions and banks allow customers to open savings and checking accounts, among other financial products.

The key difference is that credit unions are not-for-profit institutions, which tends to translate into lower fees and lower balance requirements, while banks are for-profit. Sometimes it also means that it’s easier for credit union customers to be approved for loans, McBride said.

Usually, customers are allowed to join credit unions based on where they live or work.

Credit unions serve a smaller number of customers, which also allows for a more personalized experience. The tradeoff is that banks tend to have larger staff, more physical branches and newer technology.

When it comes to the safety of customer’s money, both banks and credit unions insure up to $250,000 per individual customer. While banks are insured by the FDIC, credit unions are insured by the NCUA.

“Whether at a bank or a credit union, your money is safe. There’s no need to worry about the safety or access to your money,” McBride said. ___

Associated Press Writer Ken Sweet contributed to this report.

___

The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

Is my money safe? What you need to know about bank failures (2024)

FAQs

Is my money safe? What you need to know about bank failures? ›

Yes, if your money is in a U.S. bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you'll get your money back.

Is my money protected if a bank fails? ›

FSCS will pay compensation within seven working days of a bank or building society failing. You don't need to do anything, FSCS will compensate you automatically. More complex cases, including temporary high balance claims, will take longer and you'll need to contact us to request an application form.

Where is money safe if banks fail? ›

The Federal Deposit Insurance Corporation (FDIC) protects depositors from losing money when these events take place. Banks fund the operation through fees, meaning depositors don't have to pay separately or sign up for it.

Do I need to worry about bank failures? ›

Bottom line. For the most part, if you keep your money at an institution that's FDIC-insured, your money is safe — at least up to $250,000 in accounts at the failing institution. You're guaranteed that $250,000, and if the bank is acquired, even amounts over the limit may be smoothly transferred to the new bank.

Can banks seize your money if the economy fails? ›

It indicates an expandable section or menu, or sometimes previous / next navigation options. Your money is safe in a bank, even during an economic decline like a recession. Up to $250,000 per depositor, per account ownership category, is protected by the FDIC or NCUA at a federally insured financial institution.

Is my money safe in the bank right now? ›

FDIC Insurance

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.

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.

Has anyone lost money in a bank failure? ›

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.

Should we move money out of banks? ›

As long as your deposit accounts are at banks or credit unions that are federally insured and your balances are within the insurance limits, your money is safe. Banks are a reliable place to keep your money protected from theft, loss and natural disasters. Cash is usually safer in a bank than it is outside of a bank.

How much cash can you keep at home legally in the US? ›

While it is legal to keep as much as money as you want at home, the standard limit for cash that is covered under a standard home insurance policy is $200, according to the American Property Casualty Insurance Association.

Are the banks failing in 2024? ›

State regulators closed Republic First Bank in April 2024, marking the first bank failure of the year. Fulton Bank entered into an agreement with the FDIC to purchase most of Republic First's $6 billion in assets and to assume most of its $4 billion in deposit liabilities.

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.

Should you keep cash at home during a recession? ›

Recessions typically go hand in hand with higher unemployment, and finding a new job may not happen quickly. Catherine Valega, a CFP and wealth consultant at Green Bee Advisory in Winchester, Massachusetts, suggests keeping 12 to 24 months of expenses in cash.

Where do millionaires keep their money? ›

Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.

Should I take my money out of the bank in 2024? ›

First and foremost, it is essential to choose a bank that is insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC insures deposits up to $250,000 per depositor, per insured bank. This means that if your bank fails, you can still get your money back up to the insured amount.

What protects consumers from losing money if a bank fails? ›

The FDIC protects depositors' funds in the unlikely event of the financial failure of their bank or savings institution.

What are the three possibilities when FDIC takes over a failed bank? ›

WHAT HAPPENS WHEN THE FDIC TAKES OVER. As 60 Minutes reported in 2009, there are three ways the FDIC can take over a bank: It can close it and pay off depositors; run the bank itself; or try to find a buyer.

What amount of money is protected in a bank? ›

Up to £1 million is protected in one institution for six months after life events, such as selling a property, getting an inheritance. Savings of up to £1 million may be protected for a six-month period if your bank or building society goes bust.

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