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Having Over $100,000 in One Bank: Good or Bad?

How safe is it to have more than $100,000 in one bank?

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The safety of deposited funds is affected both by federal deposit insurance and by the stability of the depository institution. Most depository institutions are federally-insured, either by the Federal Deposit Insurance Corporation (FDIC) or by the National Credit Union Share Insurance Fund (NCUSIF), both of which are backed by the full faith and credit of the United States government.

The coverage of the FDIC and the NCUSIF, although not identical, work substantially the same. Coverage is provided per depositor per institution, to the current insurance limit (currently $100,000, with some retirement accounts insured to $250,000). A separate $100,000 limit is available for depositors with individual accounts and depositors with joint accounts. For example, you can be fully insured for individual account balances up to $100,000 (all accounts in your name alone, added together), and for another $100,000 for all account balances for which you are joint owner. There is also separate coverage for certain other types of deposits.

The FDIC provides an Electronic Deposit Insurance Estimator (EDIE) on its website, (it can generally be used to estimate coverage at credit unions, too). The FDIC and NCUSIF only cover deposits if a depository institution should fail and not be able to pay all of its depositors (or if it fails, and is sold without the purchasing bank assuming all of its deposit obligations). While that is rare, it has happened. The best protection for your funds, therefore, is to have them deposited in a well-run, stable financial institution.

Published on BankingQuestions.com 9/25/07