Is my money safe? What you need to know about bank failures (2024)

NEW YORK (AP) — Recent turmoil in the banking industry may have you worried about your money.

The collapses earlier this year of Silicon Valley Bank and Signature Bank, which catered mostly to the tech industry, were the second- and third-biggest bank failures in U.S. history.

Now there are concerns about a third bank, First Republic Bank. Shares tumbled earlier this week after the bank revealed that depositors withdrew more than $100 billion in the wake of the Silicon Valley Bank collapse.

A report Friday from the Federal Reserve found that Silicon Valley Bank failed due to a combination of extremely poor bank management, weakened regulations and lax government supervision.

After Silicon Valley Bank and Signature Bank failed, regulators stepped in to guarantee all deposits at the two banks and created a program to help shield other banks from a run on deposits.

Here’s what you need to know:

IS MY MONEY SAFE?

Yes, if your money is in a U.S. bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you’ll get your money back.

Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch.

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Credit unions are insured by the National Credit Union Administration.

If you have over $250,000 in individual accounts at one bank, which most people don’t, the amount over $250,000 is considered uninsured and experts recommend that you move the remainder of your money to a different financial institution, said Caleb Silver, editor in chief of Investopedia, a financial media website.

If you have multiple individual accounts at the same bank, for example a savings account and certificate of deposit, those are added together and the total is insured up to $250,000. (Read on for more about how joint accounts are protected.)

Federal officials have been taking steps to make sure other banks aren’t impacted.

“You shouldn’t be too concerned about your money if it’s in one of the bigger banks, and even in some of the regional banks and the credit unions,” Silver said.

ARE THERE RED FLAGS I SHOULD LOOK FOR WITH MY BANK?

If you are worried about your bank closing in the near future, there are some things you can watch out for, according to Silver:

— Watch the stock price.

— Keep an eye on the quarterly and annual reports from your bank.

— Start a Google alert for your bank in case there are news stories about it.

You want to make sure you pay close attention to the way your bank is behaving, Silver said.

“If they’re trying to raise money through a share offering or if they’re trying to sell more stock, they might have trouble on their balance sheet,” said Silver.

Public companies, including banks, do sell shares or issue new ones for various reasons, so context matters. First Republic did so this year when the hazards it faced were well known, and it kicked off an exodus of investors and depositors.

SHOULD I LOOK FOR ALTERNATIVES?

If you have more than $250,000 in your bank, there are a few things you can do:

— Open a joint account

You can protect up to $500,000 by opening a joint account with someone else, such as your spouse, said Greg McBride, chief financial analyst at Bankrate, a financial services company.

“A married couple can easily protect a million dollars at the same bank by each having an individual account and together having a joint account,” McBride said.

— Move to another financial institution

Moving your money to other financial institutions and having up to $250,000 in each account will ensure that your money is insured by the FDIC, McBride said.

— Do not withdraw cash

Despite the recent uncertainty, experts don’t recommend withdrawing cash from your account. Keeping your money in financial institutions rather than in your home is safer, especially when the amount is insured.

“It’s not a time to pull your money out of the bank,” Silver said.

Even people with uninsured deposits usually get nearly all of their money back.

“It takes time, but generally all depositors — both insured and uninsured — get their money back,” said Todd Phillips, a consultant and former attorney at the FDIC. “Uninsured depositors may have to wait some time, and may have to take haircut where they lose 10 to 15% of their savings, but it’s never zero.”

HOW LONG DOES IT TAKE FOR INSURED MONEY TO BE AVAILABLE IF A BANK FAILS?

Historically, the FDIC says it has returned insured deposits within a few days of a bank closing. The FDIC will either provide that amount in a new account at another insured bank or issue a check.

HOW MUCH MONEY CAN BE INSURED IN JOINT ACCOUNTS?

If you have a joint account, the FDIC covers each individual up to $250,000. You can have both joint and single accounts at the same bank and be insured for each.

So if a couple each has individual accounts and a joint account where they have equal withdrawal rights, they can each have up to $250,000 insured in their single accounts and up to $250,000 in their joint accounts. That means each of them will have up to $500,000 insured.

WHAT ABOUT OTHER INVESTMENTS?

Customers should take a close look at the types of investments they have in their bank to know how much of their assets are insured by the FDIC. The FDIC offers an Electronic Deposit Insurance Estimator, a tool to know how much of your money is insured per financial institution.

FDIC deposit insurance covers:

— Checking accounts — Negotiable Order of Withdrawal (NOW) accounts — Savings accounts — Money Market Deposit Accounts (MMDAs) — Certificates of Deposit (CDs) — Cashier’s checks — Money orders — Other official items issued by an insured bank

FDIC deposit insurance doesn’t cover:

— Stock investments — Bond investments — Mutual funds — Life insurance policies — Annuities — Municipal securities — Safe deposit boxes or their contents — U.S. Treasury bills, bonds, or notes — Crypto assets

HOW DOES A CREDIT UNION COMPARE TO A BANK?

Both credit unions and banks allow customers to open savings and checking accounts, among other financial products.

The key difference is that credit unions are not-for-profit institutions, which tends to translate into lower fees and lower balance requirements, while banks are for-profit. Sometimes it also means that it’s easier for credit union customers to be approved for loans, McBride said.

Usually, customers are allowed to join credit unions based on where they live or work.

Credit unions serve a smaller number of customers, which also allows for a more personalized experience. The tradeoff is that banks tend to have larger staff, more physical branches and newer technology.

When it comes to the safety of customer’s money, both banks and credit unions insure up to $250,000 per individual customer. While banks are insured by the FDIC, credit unions are insured by the NCUA.

“Whether at a bank or a credit union, your money is safe. There’s no need to worry about the safety or access to your money,” McBride said. ___

Associated Press Writer Ken Sweet contributed to this report.

___

The Associated Press receives support from Charles Schwab Foundation for educational and explanatory reporting to improve financial literacy. The independent foundation is separate from Charles Schwab and Co. Inc. The AP is solely responsible for its journalism.

Is my money safe? What you need to know about bank failures (2024)

FAQs

Is my money safe? What you need to know about bank failures? ›

Yes, if your money is in a U.S. bank insured by the Federal Deposit Insurance Corp. and you have less than $250,000 there. If the bank fails, you'll get your money back.

Is my money safe what to know about bank failures? ›

For the most part, if you keep your money at an institution that's FDIC-insured, your money is safe — at least up to $250,000 in accounts at the failing institution. You're guaranteed that $250,000, and if the bank is acquired, even amounts over the limit may be smoothly transferred to the new bank.

Can banks seize your money if economy fails? ›

Banking regulation has changed over the last 100 years to provide more protection to consumers. You can keep money in a bank account during a recession and it will be safe through FDIC and NCUA deposit insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.

Should I take my cash out of the bank? ›

You should only take your money out of the bank if you need the cash. In the bank, cash is less vulnerable to theft, loss and disaster. And depending on the bank account, you could be earning interest on your cash that you won't be earning if it stays under your mattress.

Is my money safe in the bank right now? ›

FDIC Insurance

Most deposits in banks are insured dollar-for-dollar by the Federal Deposit Insurance Corp. This insurance covers your principal and any interest you're owed through the date of your bank's default up to $250,000 in combined total balances.

How can I protect my money from a bank collapse? ›

Ensure Your Bank Is Insured

If a bank or credit union collapses, each depositor is covered for up to $250,000. If your bank or credit union isn't FDIC- or NCUA-insured, however, you won't have that guarantee, so make sure your funds are at an institution covered by deposit insurance.

Should I take my money out of the bank before a recession? ›

Generally, money kept in a bank account is safe—even during a recession. However, depending on factors such as your balance amount and the type of account, your money might not be completely protected. For instance, Silicon Valley Bank likely had billions of dollars in uninsured deposits at the time of its collapse.

What to do with your money if the economy collapses? ›

8 Things You Can Do Now to Prepare for a Possible Future...
  1. Maximize liquid savings. ...
  2. Make a budget. ...
  3. Cut back on unneeded expenses. ...
  4. Commit to closely managing your bills. ...
  5. Take inventory of your non-cash assets. ...
  6. Pay down your credit card debt. ...
  7. Get a better interest rate on your credit card.

What would happen to people's money if the bank collapsed? ›

The good news is as long as your banking institution is insured by the FDIC (Federal Deposit Insurance Corporation), your money should be safe. The government agency's primary purpose is insuring your money in case of bank failure.

Do you still owe money if a bank collapses? ›

So, no, your loans aren't forgiven if your lender goes bankrupt. You're still responsible for making payments, the only difference is that you'll be sending payments to another institution instead of the one that originally gave you the loan.

Where is the safest place to keep your money? ›

Generally, the safest places to save money include a savings account, certificate of deposit (CD) or government securities like treasury bonds and bills. Understanding your savings and investment options can help you decide the best place to park your savings.

Is Bank of America safe from collapse? ›

Bank of America is just one place below JPMorgan Chase on both the 2023 G-SIBs list and the Federal Reserve's list of the largest U.S. banks, which is why it was chosen in our research as one of the safest banks.

Can the government take money from your bank account in a crisis? ›

The government can seize money from your checking account only in specific circumstances and with due process. The most common reason for the government to seize funds from your account is to collect unpaid taxes, such as federal taxes, state taxes, or child support payments.

What bank do most millionaires use? ›

The Most Popular Banks for Millionaires
  1. JP Morgan Private Bank. “J.P. Morgan Private Bank is known for its investment services, which makes them a great option for those with millionaire status,” Kullberg said. ...
  2. Bank of America Private Bank. ...
  3. Citi Private Bank. ...
  4. Chase Private Client.
Jan 29, 2024

Is Capital One safe from collapse? ›

FDIC deposit insurance protects Capital One customers. Bank customers don't need to purchase deposit insurance—it's automatic for any deposit account opened at Capital One. Deposits are insured up to $250,000 per depositor, per ownership category at Capital One.

Can the government see how much money is in your bank account? ›

The IRS probably already knows about many of your financial accounts, and the IRS can get information on how much is there. But, in reality, the IRS rarely digs deeper into your bank and financial accounts unless you're being audited or the IRS is collecting back taxes from you.

What to do with your money if banks fail? ›

If your bank fails, up to $250,000 of deposited money (per person, per account ownership type) is protected by the FDIC. When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out.

Where is the best place to put money if banks fail? ›

1. Federal Bonds. The U.S. Treasury and Federal Reserve (Fed) would be more than happy to take your funds and issue you securities in return. A U.S. government bond still qualifies in most textbooks as a risk-free security.

What banks are in danger of failing? ›

7 Banks to Dump Now Before They Go Bust in 2023
SHFSSHF Holdings$0.50
WALWestern Alliance$27.32
ECBKECB Bancorp$11.24
PACWPacWest Bancorp$5.97
FFWMFirst Foundation$4.35
2 more rows
May 8, 2023

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