Make Sure All of Your Deposits Are Always Insured
The FDIC operates an insurance fund called the Deposit Insurance Fund (DIF), which consists of premiums paid by participating institutions. This fund totaled more than $33 billion at the end of 2012, and is well on its way to a targeted reserve ratio of 1.35 percent of all deposits. In return for premiums paid, each participating bank or savings institution is able to insure each of its individual depositors up to $250,000. The FDIC may insure more than this amount depending on the depositor’s categories of legal ownership (i.e., if a depositor has a single account and a joint account, he or she could be insured for more than $250,000). With such generous coverage, there is little reason to avoid making sure that all of your deposits are always insured. If you are approaching $250,000 across multiple accounts at one bank or think interest earned could soon put you over that amount, check with your bank to see if your ownership categories qualify you for more insurance coverage. If not, you need to begin searching for another bank in order to maintain coverage on any excess amounts.
Spread Deposits Over $250,000 out across Different Banks, not Different Branches
Despite the range of branch locations (and architecture) at some of the bigger banks, don’t confuse different branches for different banks. Even if you spread $25 million out at 10 different branches belonging to the same bank, you could end up with only a fraction of this amount guaranteed by FDIC insurance limits in the event of a bank failure.
Make Sure Your Money is Not ‘Locked Up’
Even if you’ve made sure that all of your money is covered by FDIC insurance limits, if it is all in one account it could still be out of reach for a period of time when the bank fails. This period may only be a few days, but if you have bills, a family, or a business depending on your cash flow provisions, this lack of access could tangle up a few relationships.