Stay Covered This Summer with Deposit Insurance

Six facts about the FDIC at its 74th birthday

SAN MATEO, Calif. (PRWEB) June 20, 2007 -- The Federal Deposit Insurance Corporation (FDIC) just turned 74 years old -- providing a great occasion for Americans to refresh their awareness of how the FDIC works to protect them and what they can do to keep their money safe, according to Andrew Housser, co-CEO of the free online consumer financial portal Bills.com (www.bills.com).

The U.S. government formed the FDIC in 1933, following numerous bank failures during the Great Depression. Many families lost all their financial assets. The FDIC was intended to prevent such disasters in the future by protecting consumers' deposits. Funded by banks' insurance premiums and investment earnings, the FDIC can help customers recover their losses if an insured bank fails.

"Because consumer financial protection is so critical to the stability of today's families, we've put together six facts to help consumers understand how the FDIC does - and does not - protect their funds," Housser said.

1. What is covered: FDIC insurance covers checking and savings accounts, money market deposit accounts, certificates of deposit (CDs) and outstanding cashier's checks and other financial instruments from a bank, up to $100,000 in value per account. (The National Credit Union Share Insurance Fund performs a similar job for credit unions.) Accounts at different banks are considered separately. An individual could have $100,000 at each of two banks and be insured for a total of $200,000. Retirement accounts such as individual retirement accounts (IRAs) and Keogh plans generally are insured separately, up to $250,000.

2. What is not covered: Risk-bearing investments, such as stocks, bonds and mutual funds are not insured. These funds' prospectuses include disclaimers letting investors know they are taking a risk with their money and that funds are not guaranteed. U.S. Treasury bonds are backed by the federal government, not the FDIC. Insurance policies and annuities are investments, not deposits. The contents of safe deposit boxes aren't covered, either, which should be specified in the bank's safe deposit box rental agreement.

3. When the FDIC steps in: The FDIC classifies banking organizations by their level of capitalization, or the amount of their assets. When a bank becomes "undercapitalized," the FDIC can force management changes to the bank. If a bank declines beyond a certain level, the FDIC can declare it insolvent. In cases of insolvency, funds can be repaid directly to account holders, or they can be assumed by an open bank. In the second case, in effect, the account would be closed at the old bank and opened in the same amount at a different bank.

4. How often banks become insolvent: During the 1980s, the savings & loan crisis occurred after numerous S&L institutions became insolvent -- an episode that may still be fresh in consumers' memories. But banks seldom fail. Only 26 banks have closed across the United States since Oct. 1, 2000. During the past three years, only one institution has failed.

5. When to worry: "Worry if your bank doesn't offer the coverage, signified by the institution's use of the FDIC logo," Housser cautioned. Search for FDIC-participating banks at www.fdic.gov. "Also, if you have large accounts, check to see if you have adequate coverage by visiting the Electronic Deposit Insurance Estimator at http://www2.fdic.gov/edie/.";

6. How to stay safe: "For most of us, the limits on deposit accounts are adequate. Retirement funds are more likely to put individuals in the danger zone," Housser said. "Be sure funds that are held in checking and savings accounts are covered by the FDIC. For retirement accounts, be sure accounts don't exceed the limits at any one institution. Remember, the best advice for investing is to diversify among types of risk and among institutions."

For details, Housser suggested that consumers contact their financial advisor. "The last thing anyone needs is to lose the money they thought was stashed safely in the bank," he added. "Fortunately for Americans, the FDIC offers yet another tool to make the most of our financial opportunities."

Based in San Mateo, Calif., Bills.com is a free one-stop online portal where consumers can educate themselves about complex personal finance issues and comparison shop for products and services including credit cards, debt relief assistance, insurance, mortgages and other loans. The company blogs about consumer finance issues at http://www.bills.com/blog. Since 2002, Bills.com and its partner company, Freedom Financial Network, have served more than 15,000 customers nationwide while managing more than $350 million in consumer debt. The company's co-founders and CEOs, Andrew Housser and Brad Stroh, were named Northern California finalists in Ernst & Young's 2006 Entrepreneur of the Year Awards.

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