Just like it offers insurance for money in your savings and checking accounts, the Federal Deposit Insurance Corporation (FDIC) offers protection for certificates of deposit (CDs) for up to $250,000 in case of a run on your bank.
Key Takeaways
- The Federal Deposit Insurance Corporation (FDIC) insures CDs held at member institutions for up to the deposit insurance limit of $250,000.
- This limit is applicable to the total of eligible account types for a deposit holder at each member institution.
- After a bank failure, the FDIC will either set up another account for you at a different bank or you will receive a check with your funds
- FDIC's insurance is only applicable to certain types of deposits at FDIC-member institutions.
The FDIC Covers CDs in the Event of Bank Failure
The best CD rates start around a very attractive 5% and go up. But the recent regional banking turmoil may have you concerned about your investment in case of a bank failure.
CDs are treated by the FDIC like other bank accounts and will be insured up to $250,000 if the bank is a member of the agency. If you have multiple CDs across different member banks, each will be protected up to that limit.
Furthermore, if you have a checking account balance of $40,000, a savings account balance of $100,000, and a CD in the amount of $60,000 at the same bank, that would be a total of $200,000 that is covered by the FDIC insurance. However, your total deposits in excess of $250,000 are treated as uninsured deposits and will usually not be covered.
The FDIC is an independent federal agency that was created in 1933 to support stability in the financial system. If a bank fails, the agency pays depositors with money from the Deposit Insurance Fund (DIF), to which its member institutions contribute.
For example, when Silicon Valley Bank and Signature Bank collapsed in March, the FDIC, along with the U.S. Treasury and the Federal Reserve, worked to make their depositors whole, and it cost the FDIC $22.5 billion.
If your CD or other deposit account is at a credit union, you get the same type of $250,000 insurance coverage if it's a member of the National Association of Credit Unions (NCUA).
How Does FDIC Return My Funds If My Bank Fails?
In the event of a bank failure, the FDIC could replace your insured funds in one of the following ways. Usually, within a few days following the bank closure, the FDIC will set up and fund a new account in your name at another bank for the same amount you were insured for. Otherwise, you would receive a check from the FDIC covering the full amount of your deposits.
How Do I Know if My Bank is an FDIC Member?
As of May 31, 2023, the FDIC had 4,672 members registered members and you can ask a representative at your bank if it's a member. Many banks display the FDIC logo at their branches or online. If you are still in doubt, the FDIC has a BankFind toolthat helps you locate FDIC-insured banks in your area.
Still in doubt? You can estimate the insurance coverage for your specific CD using FDIC's Electronic Deposit Insurance Estimator (EDIE) tool.
Are CDs at Online Banks Insured?
Yes, online banks can be members of the FDIC, just like brick-and-mortar banks. If so, your savings will be protected up to the same level of $250,000. The bank will likely display the FDIC logo and membership number on its website. You could also speak with a representative from the bank, or get the required information from the FDIC.
