FDIC stands for the Federal Deposit Insurance Corporation. This is an insurance that protects deposits in a bank for up to $250,000 when the bank fails. The FDIC was established after the Great Depression during which a number of banks failed, aiming at rebuilding the public confidence in the banking system. It does quite well – not a cent of insured deposits has been lost and now many banks are under the FDIC. Therefore, to protect your deposits, it’s always recommendable to check whether or not your bank is under the FDIC.
According to the FDIC guidelines, it covers a standard $250,000 for every depositor in the insured bank, or for each account ownership category. And it protects deposit accounts such as checking accounts, saving accounts, money market saving accounts, IRAs, and CDs. But it does not insure any investment accounts that you possess through the bank, such as mutual funds, annuities, stocks, and bonds.
However, the FDIC does not always give every depositor the full amount of $250,000. The FDIC decides the amount of coverage based on the financial information of the account owner. For example, FDIC might check how many accounts you have, and the dollar amount with the accounts in the banks respectively. If you have three accounts at the same bank, with a total more than $250,000, then you might only be guaranteed the first $250,000. In other words, if you have money far more than this amount, you’d better consider opening accounts at different banks, instead of opening at different branches of the same bank.