What bank accounts are FDIC-insured?

Bank failures aren’t common—but they can happen, typically when a bank is no longer able to cover its liabilities. If depositors get nervous about the viability of their bank, they might withdraw money en masse, known as a bank run. Bank runs can accelerate a bank’s failure, and ultimately the Federal Deposit Insurance Corporation (FDIC) will take control of the bank. 

But depositors can rest easy if their bank is FDIC-insured. FDIC insurance is a program managed by an independent agency of the United States government designed to protect customers in the event of bank failure. The standard FDIC insurance amount is $250,000 per depositor, per insured bank, per account ownership category. That maximum amount of $250,000 applies for each bank you have a qualified account with, as long as the bank is an FDIC member. (Discover Bank is an FDIC member.)   

So, what bank accounts are FDIC-insured? If you’re opening a bank account, it’s important to understand what FDIC insurance is and what it covers. 

What is the history of FDIC insurance?

The Banking Act of 1933 was passed in response to the bank failures of the Great Depression. In addition to other reforms, the act created the Federal Deposit Insurance Corporation. In 1935, the government made the FDIC permanent and tightened its standards.

Banks must be able to prove that they meet certain eligibility requirements to qualify for FDIC insurance, which is funded by payments from covered banks. In the rare event of a bank failure, those funds are used to reimburse the insured accounts of customers at that bank, with certain limits and restrictions.

What are FDIC insurance limits?

Today, FDIC deposit insurance covers up to $250,000 per depositor, per insured bank, for each account ownership category. Coverage wasn’t always that high, however.

When the FDIC was established, accounts were only insured up to $2,500. Over the course of the century, the covered amount was gradually raised in an attempt to keep pace with inflation. According to the FDIC, the most recent coverage increase occurred in response to the 2008 financial crisis, when the covered amount went from $100,000 to the current $250,000.

How do account ownership categories affect FDIC insurance limits?

You can increase your FDIC coverage by opening multiple account ownership categories at the same bank. For example, if you open a business account and a personal checking account at the same bank, each would be covered up to the maximum per law.

A joint bank account, meanwhile, will also be insured separately from a single-ownership account and for each owner of the account. That means if you open an individual checking account and a joint checking with your partner, those two accounts would qualify for $750,000 of total insurance.

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Note, however, that this applies to different ownership categories but not to all different types of accounts. That means an individual savings account and an individual checking account belonging to the same owner at the same bank will qualify for a total of $250,000 in FDIC insurance.

Are checking accounts FDIC-insured?

Checking accounts at FDIC-insured institutions are among the deposit products covered by FDIC deposit insurance, according to the FDIC. For your checking account to be eligible, there’s nothing you need to do. The funds you deposit into a checking account at an FDIC-insured bank are automatically protected up to the maximum per law.

Is an online savings account FDIC-insured?

All savings accounts offered by FDIC-insured institutions, including online savings accounts, are covered up to the maximum per law. For all FDIC-covered accounts, both the original deposit amount and the accrued interest within the limit will be protected. 

When opening an online account, it’s especially important to double-check that the type of account you’re opening is FDIC-insured. For example, according to the FDIC, crypto savings accounts are not protected by FDIC insurance, even if offered by an institution that is otherwise FDIC-eligible. 

Legitimate financial institutions should make clear which accounts are FDIC-insured on their websites. To be certain, always contact the financial institution directly.

Are high-yield savings accounts FDIC-insured?

High-yield savings accounts at FDIC-insured institutions are protected up to the maximum per law, according to the FDIC. If the interest on a savings account causes it to grow beyond $250,000, only the funds up to the limit will be guaranteed protection.

As with checking accounts, if you want to protect more than $250,000 in savings, you’ll need to open accounts under different ownership categories or have accounts at multiple banks.

Is a money market account FDIC-insured?

According to the FDIC, funds deposited into money market accounts offered by FDIC-insured institutions are protected up to the maximum per law, just like FDIC-insured savings accounts. 

Money market mutual funds, however, are not protected by the FDIC. Why not? Money market accounts are a type of savings account, while money market mutual funds are a type of investment account. Investments are generally not eligible for FDIC protection.

Is a certificate of deposit (CD) FDIC-insured?

Certificates of deposit at insured institutions are covered by the FDIC up to the maximum per law. 

A CD can offer better rates than a high-yield savings account, but CDs work a little differently than savings accounts. With a CD, your money is earning interest at a fixed, guaranteed rate, but if you withdraw the money before the end of its term, you may pay a penalty.  

Are Individual Retirement Accounts (IRAs) FDIC-insured?

IRAs, or Individual Retirement Accounts, are also covered up to the maximum per law at FDIC-insured institutions.

For an account to be covered, it generally needs to be “self-directed,” meaning the account holder chooses how their contributions are applied. This could include 401(k)s offered through a job or IRA saving accounts that you choose to open on your own. 

IRAs can also include CDs and money market accounts. Retirement CDs, money market accounts, and similar financial products are eligible for coverage. 

While stock and bond investments are a common feature of many retirement plans, they are not eligible for FDIC coverage. That means it’s possible that only a portion of your 401(k) or IRA will be covered.

If you’re uncertain if a retirement account or asset is covered, check with the institution providing it.

Can you increase your coverage by adding beneficiaries?

It’s possible to increase your coverage by creating a revocable trust account with multiple beneficiaries. 

Trusts are accounts that pay out to a designated beneficiary or beneficiaries after the account holder passes. FDIC coverage applies to each beneficiary for up to five beneficiaries. In other words, a trust account with one owner and five beneficiaries could be covered up to $1,250,000. 

If the trust is jointly held between two owners, the FDIC will provide up to $250,000 in coverage per beneficiary per account holder. That means if you want to maximize your coverage to the absolute limit, it would be possible to create a jointly held trust with five beneficiaries insured up to $2,500,000 in total.

It’s important to note that this information is all according to FDIC rules taking effect on April 1, 2024. Under current rules, irrevocable trusts, which cannot be altered after they’re created, can only be insured up to $250,000 regardless of the number of beneficiaries. The new rules treat both types of trusts identically and add the five beneficiary cap for calculating coverage.

Because we’re talking about potentially millions of dollars, it’s all the more essential to consult a financial planning professional about your personal situation.

Will the FDIC insurance limits ever change?

While FDIC insurance limits have been set at $250,000 since 2008, it’s always possible that the insurance limit could be increased in 2023 or down the road, according to Bankrate. 

Whether or not that happens in the near future will likely depend on how the current economic and political situation unfolds. If the past decades are any indication, Congress will probably need to raise the limit eventually to account for inflation and other factors. But it’s unclear when that might happen, and savers shouldn’t assume it will be any time soon.  

You can contact the FDIC if you have any questions or use their coverage calculator to determine how much of your funds are insured.

What else can you do to protect your money?

Opening an account with an FDIC-insured institution is a wise decision. But bank failures are just one risk to manage. You might also worry about scammers and fraudsters who want access to your hard-earned cash. Learn how to protect your bank account from fraud in 6 steps.

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* The article and information provided herein are for informational purposes only and are not intended as a substitute for professional advice. Please consult your financial advisor with respect to information contained in this article and how it relates to you.