How to make sure your bank is FDIC-insured — and what to watch for with nonbanks
Simply put, Federal Deposit Insurance Corporation insurance protects your money if your bank fails. Safeguarding your deposits is always important, but it’s particularly crucial during times of economic distress — like high inflation or a recession. Recently, regional banks like Silicon Valley, Signature and First Republic banks closed their doors due to the pressure of high interest rates. Without insurance, their banking customers would have lost all of their funds.
Working directly with an FDIC-insured institution is the simplest way to ensure your money is safe. However, protection can become murky if you use a nonbank financial technology company — or fintech — to handle your deposits. A recent bankruptcy of a relatively unknown banking-as-a-service company Synapse highlighted these risks when thousands of fintech customers were locked out of their accounts on apps such as Yotta and Dave.
While the federal government is still working to better regulate these companies, nonbank fintech customers are vulnerable. When it comes to funds you can’t afford to lose, work directly with a bank that has insurance you can verify.
How to confirm your bank is insured
The safest way to verify that your bank is FDIC-insured is to search for the institution using the FDIC BankFind tool. Or you can look for an FDIC insurance logo on the bottom of the website homepage of your bank or on their app.
You can also check for FDIC insurance by visiting a local branch and looking for an FDIC sign in the teller windows. Keep in mind that not all FDIC-insured banks have branches — some fintech companies like SoFi and LendingClub are chartered banks with deposit protection.
???? Look out for digital FDIC signs in 2025. Starting on January 1, 2025, the FDIC will require banks to display a sign near any mention of the bank’s name on a bank’s website or app. This is meant to be a digital version of the gold FDIC insurance sign that banks have been required to display at teller windows since the 1930s.
How to confirm your credit union is insured
Federal credit union accounts are insured by the National Credit Union Administration Share Insurance Fund — or NCUA. This is functionally similar to FDIC insurance.
Like the FDIC, the Share Insurance Fund allows you to look up your credit union to make sure that your deposits are protected. You can also look for an official NCUA insurance sign on a federal credit union’s website or in person at teller windows.
Smaller credit unions typically use private insurance instead of federal insurance, since they hold charters from state or municipal governments. While a portion of your funds still may be protected, it’s not necessarily equivalent to federal protection. When it comes to keeping your money safe, you may be better off using a federal credit union.
How FDIC insurance works
FDIC insurance covers up to $250,000 on individual accounts in the event that the bank fails. That’s why many people prefer to keep their bank account balances under $250,000.
The FDIC covers the following types of accounts:
Certificates of deposit and other time deposits
FDIC-eligible prepaid cards
Negotiable order of withdrawal (NOW) accounts
Cashier’s checks
Money orders
Health savings accounts (HSAs)
Some retirement accounts
With interest-earning accounts like high-yield savings, keep an eye on high balances: Next month’s interest could push you over the $250,000 threshold, putting you at risk of losing money.
Retirement accounts
The FDIC generally does not cover investments — even mutual funds or bonds that you got through your bank. One exception is self-directed retirement accounts, or retirement accounts where you have control over how the funds are invested.
Retirement accounts covered by FDIC insurance include:
Roth IRAs
Traditional IRAs
Simplified Employee Pension (SEP) IRAs
Self-directed 401(k)s
Self-directed Simple IRAs held as a 401(k)
Self-directed defined contribution sharing plans
Self-directed Keogh plan accounts for self-employed folks
Section 457 deferred compensation plan accounts
Unlike deposit accounts, the FDIC will only protect up to a maximum of $250,000 per person at an institution — regardless of how many accounts you have. So if you have a Roth IRA with $100,000 and a self-directed 401(k) with $200,000 at the same institution, $50,000 of your retirement funds will not be insured.
Employee benefit plan accounts
The FDIC can also insure deposit accounts owned by an employee benefit plan, such as a pension. To qualify for FDIC insurance, these accounts must be properly titled as an employee benefit account and controlled by a plan administrator who maintains proper documentation.
Calculating coverage amounts on employee benefits can be tricky, as it depends on the number of participants and the interest they have in the plan. To figure out how much is covered, contact your plan’s administrator.
Accounts with multiple stakeholders
The $250,000 maximum generally applies to individual accounts. But what about accounts with multiple owners or beneficiaries? In many cases, FDIC insurance will cover a larger portion of the funds.
With joint accounts, the FDIC insurance covers up to $250,000 per co-owner — or $500,000. However, this limit applies to all joint accounts that you share at a bank. So if you shared a $300,000 CD and a $275,000 high-yield savings account with your spouse, $75,000 of those funds would not be insured.
When it comes to trusts and other accounts with beneficiaries, each account is insured up to $250,000 per eligible beneficiary, with a cap of $1.25 million for accounts with five or more beneficiaries.
???? Calculate your coverage. Save yourself the time and headache of crunching the numbers yourself by using the FDIC’s electronic deposit insurance estimator — otherwise known as EDIE. EDIE can tell you exactly how much is covered at each bank you use.
Dig deeper: Can you lose money in a savings account? Top 6 risks to watch out for
How pass-through FDIC insurance works
Pass-through FDIC insurance covers deposits a third party makes in your name at an FDIC-insured bank. Third parties are anyone who acts on your behalf, such as brokers, lawyers and nonbank fintech companies.
If the bank fails and the third party took the steps to ensure you have pass-through insurance, your deposits will receive standard coverage.
Here’s what a third-party must do for you to qualify for pass-through:
Disclose your relationship to the third party in a way that is on the deposit account’s records. Usually, third parties disclose this in the account title by stating that they are acting as an agent on your behalf.
Maintain records of the identity of each account owner, either directly in the bank’s deposit account records or in their own records.
Provide proof that you, rather than the third party, owns the funds.
However unlikely, FDIC pass-through insurance may not cover the failure of nonbank companies. These include financial technology apps and even behind-the-scenes service providers.
That’s why it’s safest to deposit your funds directly into an FDIC-insured account, rather than rely on middleman companies. If you do use one of these companies, take steps to ensure that the banks they purport to work with are, in fact, FDIC-insured.
How to protect your deposits of more than $250,000
While the FDIC won’t insure more than $250,000 per individual account, it’s still possible to make sure you’re covered if you have more than that in assets.
Here’s what you can do:
Add a beneficiary to your accounts
Open a joint account
Max out contributions to self-directed retirement accounts
Open accounts at different banks and credit unions
You can also look for a bank that has Depositors Insurance Fund or DIF insurance. DIF insurance is a private insurance fund that some Massachusetts-chartered banks have in addition to FDIC coverage.
Dig deeper: 6 best ways to FDIC-insure your excess bank deposits
What to watch for with nonbanks
Companies that say their products are FDIC-insured through partner banks may be misleading you about how safe their funds actually are. Even if you can verify that its partner banks are in fact FDIC-insured, read the terms and conditions to make sure your money is protected before it reaches its final destination.
If you’ve weighed the risks and rewards and still want to work with a nonbank, stay away from companies that raise these red flags:
No information on pass-through insurance. Nonbanks that work with FDIC-insured partners typically disclose how pass-through insurance works in the fine print on their website or in the terms and conditions. Stay away from those that make no mention of pass-through insurance — you may not be covered.
No information on banking partners. Avoid working with a nonbank company that won’t disclose exactly which FDIC-insured banks it partners with. This is something you can find in your account’s fine print or terms and conditions.
Strange permission requests. If an app asks for permission to access your contacts, text messages or other irrelevant information, it could be an attempt to install malware on your device.
Unsolicited emails or texts. If you find out about a company through an email or text that you don’t remember requesting, it could be a scam.
It’s illegal for institutions to use the FDIC logo when it doesn’t apply — but that doesn’t mean you should automatically trust a company that displays one. If you suspect an institution is falsely advertising FDIC insurance, submit a question or complaint to the FDIC through its information and support system.
Sources
Deposit Insurance At A Glance, Federal Deposit Insurance Corporation. Accessed July 30, 2024.
SoFi Receives Regulatory Approval to Become a National Bank, SoFi. Accessed July 30, 2024.
About the writer
Anna Serio-Ali is a trusted lending expert who specializes in consumer and business financing. A former certified commercial loan officer, Anna's written and edited more than a thousand articles to help Americans strengthen their financial literacy. Her expertise and analysis on personal, student, business and car loans has been featured in Business Insider, CNBC, Nasdaq and ValueWalk, among other publications, and she earned an Expert Contributor in Finance badge from review site Best Company in 2020.
Article edited by Kelly Suzan Waggoner