What is deposit insurance — and how can you make the most of it?

Bank failures are rare. But when they do happen, as they have recently, savers may start to wonder whether their money is in safe hands. Fortunately, there are two long-standing federal agencies that insure deposits up to a certain amount no matter the size of your financial institution: the Federal Deposit Insurance Corporation (FDIC) and the National Credit Union Administration (NCUA). 

Let’s take a closer look at how the coverage works, which types of products qualify, and how savers can make the most of this protection.

How does FDIC and NCUA insurance work?

Created in 1933 to shore up consumer confidence in the U.S. financial system, the FDIC protects cash savings for member banks and savings associations of all sizes. The NCUA, which began in 1970, serves a similar purpose for member credit unions.

Both agencies are backed by the full faith and credit of the U.S. government, which provides a level of safety not found in stock, non-Treasury bonds or even mutual funds. In fact, no depositor has lost any money from an FDIC- or NCUA-insured deposit.

Here’s how the insurance works: In the unlikely event an insured financial institution fails, the FDIC or NCUA provides the necessary funds to help customers recoup their losses up to a certain limit. The standard amount of coverage is $250,000 per account holder, per insured institution, for each account ownership category. This amount includes the principal and accrued interest.

What does that look like in practice? Let’s say an individual has $100,000 in a savings account, $100,000 in a money market account and $50,000 in checking account — all at the same institution. Because the total of the accounts doesn’t exceed the $250,000 limit, all of the money is fully insured. 

Note that you don’t pay for deposit insurance — your bank or credit union covers the cost — and coverage kicks in automatically once you open an FDIC- or NCUA-insured account.

To ensure your money is protected, be sure to check whether your institution is insured by the FDIC or NCUA. (Raisin exclusively partners with federally insured banks and credit unions.) If you’re a bank customer, you can look for the FDIC sign posted at your bank or on the bank’s app, call the FDIC at 877-275-334, or use the FDIC’s BankFind online tool. Credit union members can look for an NCUSIF insurance sign posted in your branch, call the NCUA at 800-755-1030, or use the NCUA’s Research a Credit Union tool

What is and isn’t covered by FDIC and NCUA insurance?

Both agencies insure many but not all products offered by participating institutions. Keep the following in mind as you decide where to place your money.

Examples of products generally covered by FDIC or NCUA insurance:

Examples of products generally not covered by FDIC or NCUA insurance:

  • Stocks

  • Bonds

  • Mutual funds

  • Crypto assets

  • Life insurance policies

  • Annuities

  • Municipal securities

  • Safe deposit boxes and their contents

  • U.S. Treasury bills, bonds or notes

Note that Securities Investor Protection Corporation (SIPC) coverage protects against the loss of cash and securities, like stocks and bonds, up to $500,000, including up to $250,000 protection for cash in your account to buy securities.

What happens if your deposits exceed the threshold?

The FDIC and NCUA covers deposits up to $250,000 per account owner. But what happens if you have more than that in the bank? 

One common strategy is to spread your money across different banks or credit unions. Every time you open a new account at an insured financial institution, you may be eligible for another $250,000 in coverage. With the Raisin platform, it’s easy to open accounts at multiple institutions and spread your deposits to maximize your coverage, all from a single secure login.

If you need help making sense of your coverage options, there are resources available to you. The FDIC’s Electronic Deposit Insurance Estimate (EDIE) or the NCUA's Electronic Share Insurance Estimator are good places to start.

Does the size of the bank matter?

When it comes to insuring your money, the size of the financial institution doesn’t matter. As long as the institution is federally insured, your cash savings receive the same $250,000 protection whether they’re sitting in a major bank or at a smaller bank or credit union.

That said, savers may find it’s worth their while to give smaller banks and credit unions a second look. As of April 2023, the national average savings interest rate was 0.46%, according to the FDIC. Many major banks offer annual percentage yields (APY) in that neighborhood — or, in some cases, as low as 0.01%. However, with their smaller footprints, community and regional banks, online-only banks and credit unions can often offer customers much more competitive rates on deposit accounts and loans and may also charge fewer and/or lower fees.

For instance, federally insured banks and credit unions choose to partner with Raisin to offer top interest rates (typically many times greater than the national average)—all with no fees.

What happens to your money if a bank or credit union fails?

If your bank or credit union fails, all is not lost. Typically, the FDIC will step in when a member institution is unable to meet its financial obligations to depositors and others. Funds will temporarily be frozen while a resolution is met.

In many cases, they’ll move your account over to a healthy FDIC-insured bank, and you can access your insured funds there. If no banks step in right away, however, the FDIC will pay you up to the insured limit. This usually happens within a few days after your original bank closes. 

Credit union failures work in a similar fashion. Like the FDIC, the NCUA will try to transfer your account to another healthy credit union. If that is not possible, the agency will reimburse your insured funds by check, usually within a few days of the credit union’s closing. 

Raisin can help you keep your funds secure

Banks and credit unions are generally considered safe places to put your money, so long as they’re insured. Every single bank or credit union in the Raisin network has federal deposit insurance from either the FDIC or NCUA, which means your savings are protected up to the applicable legal limits.

In the event of a failure, your funds would likely be temporarily frozen while the FDIC works toward resolving the failure, either through issuing payment to the depositor directly by check up to the insurance balance in each account (typically within a few days of the bank closure) or through the purchase of the failed bank by a healthy bank.

What’s more, Raisin makes it easy to spread your deposits across multiple financial institutions, allowing you to maximize your insurance coverage while also earning market-leading interest rates. 

Ready to get started with Raisin? View our current product offerings and open an account here.

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*APY means Annual Percentage Yield. APY is accurate as of {todayDate}. Interest rate and APY may change after initial deposit depending on the terms of the specific product selected. Minimum opening deposit is $1.00.

Raisin is not an FDIC-insured bank or an NCUA-insured credit union, and does not hold any customer funds. Funds deposited through Raisin are exclusively held at federally insured financial institutions. FDIC or NCUA deposit insurance coverage covers the failure of partner banks and credit unions on the Raisin platform.

Customer funds are held in various custodial deposit accounts. Each customer authorizes the Custodial Bank to hold the customer’s funds in such accounts, in a custodial capacity, in order to effectuate the customer’s deposits to and withdrawals from the various bank and credit union products that the customer requests through Raisin.com. The Custodial Bank does not establish the terms of the bank or credit union products and provides no advice to customers about bank or credit union products offered through Raisin.com. Central Bank of Kansas City (CBKC), Member FDIC, d.b.a. Central Payments is the Service Bank. CBKC, Lewis & Clark Bank and Starion Bank, each Member FDIC, are the Custodial Banks.