Yes, CDs are FDIC insured up to $250,000 in most cases. Nearly all banks are members of the Federal Deposit Insurance Corporation (FDIC), which means their certificate of deposit (CD), savings, checking, and money market accounts are all covered up to the threshold.
How Does FDIC Insurance Work for CDs?
Coverage Limits
The FDIC insures CDs up to $250,000 per person in each account ownership category at a single bank.
The FDIC ownership categories are:
- Single Accounts: Personal accounts, such as a checking or savings account owned by one person.
- Certain Retirement Accounts: Individual retirement accounts (IRAs), like Traditional IRAs, Roth IRAs, or Simplified Employee Pensions (SEPs).
- Joint Accounts: Savings or checking accounts that belong to two or more people.
- Revocable Trust Accounts: Accounts that can be altered or revoked during the owner's lifetime, such as a living trust.
- Irrevocable Trust Accounts: Trusts that, once established, cannot be modified or terminated without the permission of the beneficiaries or a court order.
- Employee Benefit Plan Accounts: Accounts with funds from a retirement plan or employee benefit plan, like a 401(k).
- Corporation/Partnership/Unincorporated Association Accounts: Business accounts for companies with different structures including corporations, partnerships, or unincorporated associations.
- Government Accounts: Public entity accounts, such as those associated with state or local government departments and agencies.
Multiple Accounts
If you hold several accounts in the same ownership category at the same bank, like a certificate of deposit, checking account and savings account, their combined balances are covered up to the $250,000 limit.
On the other hand, an account in a different ownership category or at another bank has a separate $250,000 coverage limit.
In the Event a Bank Fails
If a bank holding your CD fails and it's FDIC insured, the FDIC protects your investment in one of two ways:
- Arranging for Another Financial Institution to Step In: Another financial institution often takes over the failed bank's operations, ensuring customers can access their money seamlessly.
- Direct Reimbursement: If no institution takes on the deposits, the FDIC will directly reimburse accountholders up to the insured amount, typically within a few days of the bank's closure.
Verifying FDIC Membership
While most banks with CD offerings are FDIC members, some are not. You can verify a bank's FDIC membership by asking a bank representative, looking for the FDIC sign at a branch location, calling the FDIC at 877-275-3342, or using the FDIC's BankFind tool.
How to Get More FDIC Insurance for Your CD Accounts
If the amount of money you want to invest in a CD exceeds the FDIC threshold, you'll need to strategically distribute your funds or add a co-owner to your account.
Open Accounts at Different Banks: If you have more than $250,000 to deposit in a CD, you could split the money between accounts at different FDIC-insured banks so the funds are fully covered.
Add a Co-Owner: Each co-owner is insured up to $250,000 for their share of a joint CD. For example, a joint account held by two people would be insured up to $500,000.
Use CDARS: The Certificate of Deposit Account Registry Service (CDARS) program allows businesses to invest in CDs across multiple banks but manage the investment through a single financial institution. This way, you can stay under the FDIC limit at each institution but still have the convenience of working with just one bank.
What CDs Are Not FDIC Insured?
Some CDs are not covered by FDIC insurance because of the entity they are issued by or the country they're issued in.
- Brokered CDs: While CDs purchased through brokers can be FDIC insured, you should always check before you get one. Sometimes, brokered CDs can come from non-FDIC insured banks or are structured in ways that don't qualify for FDIC protection.
- Credit Union CDs: Certificates of deposit from credit unions are not insured by the FDIC. Instead, they are typically insured by the National Credit Union Administration (NCUA). The NCUA provides similar insurance coverage up to $250,000.
- Foreign CDs: CDs from foreign banks, even if purchased in the U.S., might not be FDIC insured. However, some foreign banks have FDIC-insured branches in the U.S.
- Private Deposit Insurance: Some state-chartered credit unions may have private insurance. The terms and protections of private insurers can differ from those of the FDIC.
FDIC vs. NCUA Insurance for CDs
The Federal Deposit Insurance Corporation (FDIC) insures CDs held by banks, while the National Credit Union Administration (NCUA) provides coverage for CDs at federally chartered credit unions and most state-chartered credit unions. Despite insuring deposits at different types of institutions, the FDIC and NCUA are very similar.
- Purpose: The primary purpose of both the FDIC and NCUA is to maintain stability and public confidence in the U.S. financial system by insuring deposits, including money held in CDs.
- Insurance Coverage: Both agencies offer insurance coverage for CD accounts up to $250,000 per person at a single institution.
- Funding: The FDIC is funded by premiums paid by insured banks. Similarly, the NCUA draws its funding from premiums paid by insured credit unions.
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