Are CDs FDIC insured?

First, let’s look at what the FDIC is. Short for Federal Deposit Insurance Corporation, the FDIC is an independent government agency established in 1933 to protect consumers in the event of a bank failure. Its primary role is to insure deposits at FDIC-member banks. 

The FDIC covers up to $250,000 per depositor, per insured bank, per ownership category. The insurance protects both the principal and any accrued interest up to the limit. If your bank fails, the FDIC guarantees payment of your insured deposits, typically reimbursing the funds within a few business days.

Here’s a handy overview of what is and isn’t covered by the FDIC within the banking industry.

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If you’re wondering, “Are bank CDs FDIC insured?”, the answer is yes, as long as they are issued by a bank that is a member of the FDIC. The insurance limit is $250,000 per depositor, per ownership category, so as long as your CD remains under that limit (taking into account any other products you hold with the same bank), your CD will be fully protected.

For example, you could have the following products at the same FDIC-insured bank and remain fully insured:

• $100,000 in a CD

• $40,000 in a savings account

• $100,000 in a money market account

You should also consider the interest earned on your savings account(s). If the interest earned raises your total balance over the $250,000 limit, any amount above that may not be insured.

FDIC ownership categories refer to the different ways deposit accounts can be owned or titled, which determine how FDIC insures the funds. Each category is insured separately. Common FDIC ownership categories include:

• Single accounts: Owned by one person, with no beneficiaries.

• Joint accounts: Owned by two or more people, each with equal rights to withdraw funds.

• Revocable trust accounts: Includes payable-on-death (POD) and living trust accounts.

• Business accounts: Accounts owned by corporations, partnerships, or unincorporated associations.

Each of these categories is eligible for up to $250,000 in coverage per person, per insured institution. So, if you use multiple ownership categories, you may be able to increase your total FDIC coverage at a single institution.

Keeping your savings secure is essential, so it’s important to check that a certificate of deposit is insured by FDIC before you open one. In terms of what CDs are not FDIC insured, here are a few examples:

• A CD that is issued by a non-bank financial institution, such as a brokerage firm that isn’t FDIC-insured

• A CD that is issued by a foreign bank or a non-U.S. institution, which falls outside the FDIC’s jurisdiction

• You exceed the FDIC limit at a single bank. For example, if you already have multiple savings accounts with a balance totaling more than $250,000 in the same ownership category

Now that we’ve covered the FDIC and CDs at banks, what about CDs at credit unions? Credit unions are typically protected by the National Credit Union Administration (NCUA), a U.S. government agency that insures deposits at federally insured credit unions. 

In terms of how CDs are insured at credit unions, the NCUA operates similarly to the FDIC, offering protection of up to $250,000 per depositor, per credit union, and per ownership category. This includes both the principal and any interest earned on a CD. 

Read more about the differences between banks and credit unions.

If a CD account is FDIC insured, this is what typically happens in the case of bank failure:

1. The FDIC steps in as the insurer. 

2. They will typically reimburse your insured deposit (both the principal and the interest earned) within a few business days.

3. The FDIC will either issue you a check with the full insured amount or fund a new account in your name at another bank offering FDIC CD protection.

Remember, if your total deposits (including accrued interest) exceed the FDIC insurance limit, the excess amount may not be recovered.

Generally, you can’t lose money on a CD, as long as it’s FDIC-insured (or NCUA-insured for credit unions) and you hold it until maturity. However, if your bank allows you to make a withdrawal before maturity, you may have to pay a penalty, which could reduce your earnings.

You may lose money if the issuing institution fails, and:

• The CD is not insured (e.g., issued by a non-FDIC institution), or

• Your total deposits at the bank exceed the FDIC coverage limit, and the uninsured portion is lost.

Only CDs issued by a bank that is a member of the FDIC are insured, up to $250,000 per depositor, per ownership category. CDs issued by a credit union that is a member of the NCUA are also insured up to $250,000 per depositor, per ownership category. It’s essential to do your own research and ensure that your bank or credit union is covered.

Yes, multiple CDs can be fully FDIC insured as long as your total deposits per bank per ownership category stay within the $250,000 limit or you spread them across multiple FDIC-insured banks or categories.

Yes, the interest earned on federally insured CDs is covered as long as the total (both principal and accrued interest) is within the $250,000 limit as of the date the bank fails.

For example, if you opened a CD with a principal balance of $240,000 and earned $10,000 in interest, you would be fully insured, as the total remains under the insurance limit.

Checking if you’re fully FDIC insured is simple to do. You can visit the FDIC’s Electronic Deposit Insurance Estimator to confirm that any banks you hold financial products with are FDIC-insured. Add up all your deposits at the bank by ownership category (for example, individual, joint, or trust) and ensure the total doesn’t exceed $250,000.

Yes, you can use a strategic approach to ensure all of your money is protected if you have more than $250,000 in savings. To increase your certificate of deposit insurance, you could consider: 

• Using multiple ownership categories at the same bank, for example, $250,000 in a single account, and $250,000 in a retirement account

• Opening an account with different FDIC-insured banks. FDIC coverage applies per bank, so you can spread your funds across multiple banks to increase your overall protection.

• Using trust arrangements or payable-on-death (POD) accounts, which allow you to name multiple beneficiaries and cover up to $250,000 per unique beneficiary.

Now you know the answer to “Are CDs FDIC insured?” What's next? Raisin helps you find and open competitive CDs across multiple banks and credit unions to maximize your returns. Find out how to open multiple CDs with Raisin, or compare rates today to find the best CD for you.

The above article is intended to provide generalized financial information designed to educate a broad segment of the public; it does not give personalized tax, investment, legal, or other business and professional advice. Before taking any action, you should always seek the assistance of a professional who knows your particular situation for advice on taxes, your investments, the law, or any other business and professional matters that affect you and/or your business.