ASK KIM


Is My Bank Safe?

Kimberly Lankford

Here's how to know whether your money still will be there if your financial institution fails.



How can I find out whether I need to worry if my bank is at risk of going under?

Five banks have already failed this year -- including IndyMac July 11 -- and others are having troubles. But you don't need to worry about your money as long as your balance stays below the Federal Deposit Insurance Corp. limits.

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If you have less than $100,000 at that bank, you definitely will be covered. And if you have several types of accounts, you can have as much as $450,000 -- or more -- in FDIC coverage. Stay within those limits, and there's absolutely no need for a run on the bank.

First, make sure your bank is covered by the FDIC, the U.S. government agency that protects your deposits if the bank fails. Don't just take the bank's word for it. Look up its status using the FDIC's BankFind tool or by calling the FDIC at 877-275-3342 (from 8 a.m. to 8 p.m. Eastern time). Credit unions are insured through the National Credit Union Share Insurance Fund. You can find out your credit union's status at www.ncua.gov.

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Then, calculate your FDIC limits. You have a $100,000 FDIC limit for single accounts, $100,000 for your share of joint accounts, and up to $250,000 for certain types of retirement accounts, including IRAs. You can check your coverage limits by using the FDIC's Electronic Deposit Insurance Estimator (EDIE).

If you have more money in that bank than the FDIC limits, just shift the extra money to another bank. The limits apply to each institution where you have an account. So, for example, if you had single accounts at three different banks, up to $100,000 would be protected at each bank -- for a total of $300,000 that's covered.

As long as your balance is under the FDIC coverage limits, then you'll have continuous access to your money and may just lose some services temporarily during the transition. IndyMac was closed by the FDIC on Friday, July 11, and some branches were closed early for the day. Customers lost access to online and phone banking services over the weekend but could still withdraw insured deposits through ATMs. All banking services resumed for insured depositors by Monday morning, July 14. See the FDIC's IndyMac information page for details and contact information.

The situation gets trickier if you have uninsured deposits -- which is affecting about 10,000 IndyMac customers who have as much as $1 billion in total uninsured deposits. The FDIC gave them access to 50% of their uninsured money right away, and they will gradually receive more money as the FDIC sells the bank's assets.

The FDIC typically recovers about 80% to 90% of uninsured deposits in the end, but that process can take a while. When NetBank failed on September 28, 2007, customers maintained access to their insured deposits plus 50% of their uninsured deposits through ING Direct, which took over the accounts. The FDIC recovered more money for uninsured depositors over the following months -- an additional 21.3% by December 18, 2007, and another 6.32% by April 2, 2008. So far, former NetBank customers have recovered 77.65% of their uninsured deposits.

For updates about failed banks and to see and how much money has been recovered, see the FDIC's Failed Bank List. Click on "Dividend History" for each bank to see how much the FDIC has recovered so far.

For more information see When a Bank Closes and Is Online Banking Safe?, which explains what happened to NetBank customers after the FDIC took over.

Got a question? Ask Kim at askkim@kiplinger.com.




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