If you've ever watched a news story about a bank failing and wondered about your own checking account, here's the short answer: yes, your money is safe. If it's in a federally insured bank or credit union and under the insurance limit, the U.S. government stands behind it. Since the FDIC began insuring deposits in 1934, no depositor has lost a penny of insured deposits. The fund that insures credit unions has the same record.
For most people, that's the whole answer. The rest of this article is the fine print: what the limit really is (it's bigger than it sounds), what to do if you have more than the limit, what isn't covered, and where money apps fit in.
Two agencies, one promise
Bank deposits are insured by the FDIC, the Federal Deposit Insurance Corporation. Credit union deposits are insured by the NCUA, the National Credit Union Administration. At a credit union it's called share insurance, because your savings there are technically shares in a cooperative you own. The name is different and the protection is the same: $250,000, backed by the full faith and credit of the United States.
You don't sign up for it or pay for it. It comes with the account. To check, look for "Member FDIC" or the NCUA sign at the branch or at the bottom of the website, or look the institution up with the FDIC's BankFind tool or the NCUA's credit union locator. Nearly every credit union is federally insured. A small number of state-chartered credit unions carry private insurance instead, and they have to tell you so.
The $250,000 limit is bigger than it sounds
The limit is $250,000 per depositor, per institution, for each ownership category. Each part of that sentence matters.
Per depositor means each person. Per institution means each bank or credit union: money at two different banks is insured separately, but two branches of the same bank count as one. So do two brand names of the same bank, and that's a trap if you're not wary. Some banks run their online accounts under a different name, and a large bank might use different names in different regions while legally being one bank. Ownership category means the way an account is held. The common ones:
An account in your name alone: $250,000.
A joint account: $250,000 for each co-owner, so $500,000 for a couple.
Retirement accounts like IRAs: $250,000, counted separately from everything else.
Trust accounts (including accounts with named beneficiaries) and business accounts have rules of their own, and can be covered for more.
Put together, a married couple could keep $1.5 million at one bank and have every dollar insured: $250,000 each in individual accounts, $500,000 in a joint account, and $250,000 each in IRAs. That's before counting any accounts with beneficiaries.
If you have more than $250,000
Most people never get near the limit. If you do, the money above it at any one institution is uninsured, and in a failure you could lose some of it. There are three common ways to keep it all covered.
Use ownership categories. Joint, retirement, and trust accounts each get their own coverage, as above.
Spread it across institutions. $250,000 at each of several banks or credit unions is fully insured at each one.
Automate the spreading of funds. Ask about an insured sweep account. Many banks, and some credit unions, offer a service that spreads a large balance across a network of insured institutions, in pieces under the limit. You deal with one bank or credit union and get one statement. Tell them where else you bank, so a piece doesn't land somewhere you already have money. You'll probably have to pay a small fee or take a slight rate reduction for this service. For deposits of this size, a small rate reduction can add up, so there's a real tradeoff here compared to doing it yourself.
If you're in this bracket, it's worth talking to a financial adviser, who can look at the whole picture and not only the bank accounts.
What deposit insurance doesn't cover
Deposit insurance covers deposits: checking, savings, money market accounts, and CDs. It doesn't cover investments, even ones you bought at your bank. Stocks, bonds, mutual funds, annuities, life insurance, and crypto aren't insured by the FDIC or the NCUA. Neither is whatever is in your safe deposit box.
One name trips people up. A money market account is a deposit, and it's insured. A money market fund is an investment, and it isn't.
When the app isn't the bank
Many popular money apps aren't banks. They partner with a bank that actually holds the money, while the app handles everything you see. When that works, your money can be insured through the partner bank.
But deposit insurance only pays out if the bank fails. If the app company goes under instead, your money should still be sitting at the bank, but getting it back depends on records that show which dollars are yours. When those records are wrong, money can be frozen for months or longer, and deposit insurance doesn't help, because no bank failed.
Before you keep real money in an app, check the fine print for a line like "Banking services provided by [name] Bank, Member FDIC." If the bank named there isn't the company whose app you're using, you're in a partner setup. Either way, the Member FDIC declaration means the bank holding your money is insured, up to the limits discussed earlier. In a partner setup, it covers the bank, not the app.
So, is your money safe?
Yes. A regular account at an insured bank or credit union, under the limit, is about as safe as money gets. The places to look twice are at the edges: balances over $250,000, investments that aren't deposits, and apps that aren't banks.
We're building a free tool to help you find the right bank or credit union for you, weighing cost, convenience, and your values. Join our email list and we'll let you know when it's live.