What If My Bank Fails?


There's been plenty of talk about banks and lending institutions being bailed out by the government, or purchased by their competitors in order to stay afloat. What's more, reports of Washington Mutual Bank folding unless it was purchased evoked images of depression-era Americans lining up in front of their banks waiting to withdrawal funds to store in a tin can underneath the mattress.

Eventually, WaMu fell victim to the recent economic troubles and was seized by federal regulators only to be sold to JP Morgan Chase on Sept.25. So, what if your bank is reported to fail? What do you do?

The Federal Deposit Insurance Corporation (FDIC) has some suggestions for you in case this should occur:

When will I get my money?If, for some reason, your bank should fail, you shouldn't worry. The FDIC makes insured funds available to depositors as soon as the next business day after the bank closes.

Is there a limit to how much money is covered by the FDIC?The FDIC insures bank accounts that have a balance of $100,000 or less. For example, if you have an account with a balance of $105,000, which includes interest earned, you'll immediately be paid $100,000 that is covered by the FDIC. And, you'll receive a claim against the closed bank for the remaining $5,000 that was not insured.

What about any loans or credit cards from the bank?If you have a loan or credit card through the failed institution, it will either be sold to a healthy bank or retained temporarily by the FDIC. You should receive written instructions on where to send your credit card payments.

How do I obtain my belongings in the bank's safe deposit box?Access to the contents of your safe deposit box should be available the next business day after the bank's closing.

The FDIC was created after the great depression — when several banks failed in the 1920s and 1930s — to insure the savings, checking and other deposit accounts of the American consumer.

In addition to insuring deposit accounts, the FDIC generally provides separate coverage for retirement accounts, such as individual retirement accounts (IRAs) and Keoghs, insured up to $250,000.

The FDIC insures deposits only. It does not insure securities, mutual funds or similar types of investments that banks and thrift institutions may offer.

Your bank is more than likely safe, but if you have questions about the FDIC and if your funds are secure, consult your on-base financial counselor or visit Military.com's Finance channel.

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