A Short History of the FDIC

Hundreds of years ago, before the Federal Deposit Insurance Corporation existed, bank robbers were a serious problem. Well, bank theft is still a pervasive issue, but victims need only fill out the right paperwork to get a refund while bank employees have various protections to keep themselves physically safe. In the days before the FDIC, a bank could go out of business for good if it got robbed and all of its customers would be left holding the bag. So, what is the FDIC?

It’s a company that backs banks and their customers in case hackers, stagecoach robbers, unscrupulous employees, or financial disaster hits a finance company hard.

The Reason Your Bank Deposits Are Safe

When you deposit money into a CD, a checking account, or even a safe deposit box, it’s guaranteed to be there – if you partner with an FDIC insured bank. That’s the reason why banks proudly display their FDIC logos in brochures and leaflets. All consumers want to know that their money is safe, regardless of whether the stock market crashes, World War III is announced, or their bank suddenly goes out of business. The FDIC not only insures money but it helps to take a look at internal banking practices to ensure that all money remains accounted for.

Limitations On FDIC Protections

The good news is that the FDIC exists. Since 1933, the Federal Deposit Insurance Corporation has been around to keep consumers afloat. However, you should realize that even the FDIC has limitations in place that help to protect customers, as well as big banks. If you have a checking or savings account with an FDIC insured bank, keep your balance at $250,000 or less per account. That’s the maximum amount that the FDIC can help a consumer recoup, at least without taking more steps. Remember that you can also just open more than one account at the same bank so that you’re able to keep your cash deposits safe and not need to have business with dozens of banks.

What the FDIC Doesn’t Do

There are various products that banks sell to consumers, but they’re not all backed by the FDIC. For instance, if you invest your money in a 529 plan, you can’t call the FDIC and ask for help if something goes wrong. The protections offered by the FDIC relate to deposits alone. Stocks, bonds, secured credit cards and other bank finance products don’t fall into FDIC territory. The Consumer Financial Protection Bureau might actually be a better option for consumers who have trouble getting their banks to honor their end of the contract.

Put your money into a bank account that’s insured by the FDIC and you will never have to worry about it being stolen from you. Your bank can be bought out or go bankrupt and it still won’t matter. The money that you put into an FDIC insured bank – so long as it’s $250,000 or less – will be recovered and sent to you expeditiously, so the bank really is safer than keeping your money in the mattress.