Will Bank Deposits Remain Secure by 2025?
In the relatively stable U.S. banking system of 2025, depositors can breathe a sigh of relief knowing that their deposit accounts are safeguarded by the Federal Deposit Insurance Corporation (FDIC). This government agency, established during the Great Depression in 1933 to restore confidence in banks, provides insurance coverage for traditional deposit products such as checking accounts, savings accounts, money market deposit accounts, and certificates of deposit (CDs).
However, it's important to note that investments like stocks, bonds, mutual funds, cryptocurrencies, and other non-deposit investment products are not covered by FDIC insurance. This means that depositors should be aware of the limits of their insurance coverage and take steps to protect their funds.
The FDIC insures deposits up to $250,000 per depositor, per FDIC-insured bank, per ownership category. This limit applies to the combined total of all deposit accounts you hold at a single bank within the same ownership category. For instance, if you have three savings accounts at the same bank all in your name, the total coverage across them is $250,000, not $250,000 each.
Ownership categories are key to maximizing coverage. Each category is insured separately up to $250,000. For example, single accounts (owned by one depositor) are insured up to $250,000 per owner, joint accounts (shared by multiple owners) up to $250,000 per co-owner, and certain retirement accounts (e.g., IRAs) up to $250,000 per owner.
In the event that a bank fails, the FDIC usually transfers your insured deposits to another bank quickly, or sends you a check. This was the case with Pulaski Savings Bank (Chicago, IL) and The Santa Anna National Bank (Santa Anna, TX), which failed in 2025 due to suspected fraud and unsafe practices. Millennium Bank took over Pulaski Savings Bank, and Coleman County State Bank stepped in for The Santa Anna National Bank.
It's worth mentioning that the failures of Pulaski Savings Bank and The Santa Anna National Bank were not "domino effect" failures caused by a collapsing economy, but due to internal problems specific to those banks. Over 500 banks have failed in the USA since the start of the new millennium, but the current situation is not expected to cause a widespread crisis.
If you want to insure more than $250,000, you can:
- Open accounts in different ownership categories at the same bank. - Spread deposits across multiple FDIC-insured banks. - Use banks or services that offer extended FDIC insurance.
To simplify understanding your total coverage, the FDIC provides an online tool called EDIE (Electronic Deposit Insurance Estimator), which helps calculate your insured amounts across accounts and banks.
Depositors should also monitor the balances in each of their accounts, utilise different account types (e.g., individual vs joint accounts), and diversify into tangible, income-generating assets to provide security outside traditional banks. Agencies like the FDIC and the Federal Reserve keep a very close eye on banks, ensuring the stability of the U.S. banking system.
However, the commercial real estate sector is facing challenges, with defaults on the rise. Smaller banks with significant investments in the commercial real estate sector could potentially be affected. If you have a lot of money or complex accounts, it may be wise to consult a financial advisor.
In conclusion, by understanding FDIC insurance coverage and utilising different ownership categories and multiple banks, depositors can protect amounts well beyond $250,000 if desired. It is crucial to stay informed about your bank's financial health and current banking news to ensure the safety of your deposits.
- In light of the challenges in the commercial real estate sector, depositors with significant investments in multiple banks might want to consult a personal finance expert.
- For those desiring insurance coverage beyond the $250,000 limit, strategies such as opening accounts in different ownership categories at the same bank, spreading deposits across multiple FDIC-insured banks, or using banks that offer extended FDIC insurance can be beneficial.
- As the market for rental properties becomes more competitive, investors looking for turnkey real estate opportunities need to keep a close eye on market trends and bank news to ensure their investment remains secure.
- To safeguard their personal-finance portfolio, investors may find it prudent to diversify their assets beyond traditional banks, considering investments in stocks, mutual funds, or other non-deposit products while still being mindful of their FDIC insurance coverage.
