1. Banking 101

Federal Deposit Insurance: Spread Out Your Money to Be Safe

Federal deposit insurance protects consumers’ bank account balances up to a certain amount as long as they’re at a legitimate bank that is a member of the Federal Deposit Insurance Corporation (FDIC). According to the FDIC, since its creation in 1933, “no depositor has ever lost even one penny of FDIC-insured funds.”

Under legislation passed during the financial crisis of 2008, FDIC insurance protection was expanded from $100,000 to $250,000 per depositor across all accounts of the same category.22 If the amount of money you keep in bank accounts exceeds current federal deposit insurance limits, you’ll need to do some planning so that if a bank fails, all of your money will be protected, not just the first $250,000.

There’s nothing wrong with doing this—it’s perfectly legal. If your account balance exceeds FDIC-insured limits and you want to make sure all your money will be safe, visit the FDIC’s website for more information. Ally Bank also has a helpful page explaining how you could achieve $2 million in FDIC coverage at the same bank by using a variety of accounts. You can also, of course, keep your money in more than one bank to spread your risk.

Spreading your money across several accounts isn’t the only way to protect it. Whether or not you are banking online, you want to prevent unscrupulous individuals from stealing your identity and your funds. There are steps you can take, such as shredding bank statements and being on the lookout for card skimmers.

The Bottom Line

Banks provide security and convenience for managing your money and sometimes allow you to make money by earning interest. Convenience and fees are two of the most important things to consider when choosing a bank, whether you are opening a checking, savings or money market account or putting funds into a certificate of deposit. Be sure to develop methods to stay on top of your account balances in order to avoid fees, declined transactions, and bounced payments.

To protect your money from electronic theft, identity theft, and other forms of fraud, it’s important to implement basic precautions such as having complex passwords, safeguarding your PIN, and only conducting online and mobile banking through secure internet connections.

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