Key Takeaways
- The FDIC insures up to $250,000 per person per bank, so deposits under that amount are fully protected if the bank fails.
- Banks are required to keep your deposits in a separate account and cannot use your money for their own business.
- If you have more than $250,000 to save, you can spread it across multiple banks to keep all of it insured.
- Your account is not at risk from the bank's business decisions or market downturns — only from the bank's actual failure, which is rare.
- Online banks and credit unions have the same FDIC protection as brick-and-mortar banks, so the delivery method does not change the safety of your money.
How FDIC Insurance Works
The FDIC is a federal agency created in 1933 after the bank failures of the Great Depression. Every bank that takes deposits must pay into the FDIC insurance fund. When a bank fails, the FDIC steps in, takes over the bank's assets, and pays depositors back up to the $250,000 limit per account.
The $250,000 limit applies per person per bank. If you have $250,000 in a checking account and $250,000 in a savings account at the same bank, both are covered — the limit is per account type. If you have $250,000 at Bank A and $250,000 at Bank B, both are covered because they are different banks. The FDIC counts each account separately, so you can increase your coverage by spreading money across institutions.
Joint accounts are also covered separately. If you and your spouse each have $250,000 in a joint savings account, the FDIC insures $250,000 for you and $250,000 for your spouse — a total of $500,000 on that one account. Retirement accounts (IRAs, 401(k)s held at a bank) are insured separately as well, up to $250,000 each.
What Happens If a Bank Fails
Bank failures are uncommon in the United States. The FDIC has insured deposits since 1933, and the agency has never run out of money to pay depositors. When a bank does fail, the FDIC typically arranges for another bank to take over the failing bank's deposits and accounts overnight. You wake up, log in, and your account is now at a different bank — your balance is unchanged.
If no bank takes over the deposits, the FDIC pays you directly. This process usually takes a few weeks. You receive a check or a direct deposit for the full amount of your insured balance. If your balance exceeds $250,000, you receive $250,000 and lose the rest — which is why the limit matters if you are saving a large amount.
The last significant bank failure in the United States was Silicon Valley Bank in March 2023. Depositors with balances under $250,000 were paid in full by the FDIC. The government later arranged for another bank to take over the deposits, so most customers did not experience a delay.
How Banks Keep Your Money Separate
Banks are required by law to keep customer deposits in a separate account from the bank's own operating money. This is called segregation of funds. Your savings account balance is not mixed with the bank's cash reserves or used to pay the bank's employees. The bank can lend out a portion of deposits (that is how banks make money), but the bank must always have enough liquid funds on hand to pay you when you withdraw.
Banks are also required to maintain a minimum amount of capital — money the bank owns, not customer deposits — to absorb losses. This capital requirement is set by federal regulators and varies by bank size. A bank with insufficient capital can be shut down by regulators before it fails, which prevents depositors from losing money in the first place.
You can see a bank's capital level and regulatory status on the FDIC's website. Search for the bank by name, and the FDIC shows you its most recent inspection report, including whether regulators have flagged any concerns. This information is public.
Risks That FDIC Insurance Does Not Cover
FDIC insurance protects you from the bank failing. It does not protect you from your own decisions. If you withdraw money and spend it, or if you transfer money to a scammer, the FDIC does not reimburse you. If you authorize a wire transfer to the wrong account, that is your loss, not the bank's.
FDIC insurance also does not protect you from inflation. If you keep $10,000 in a savings account earning 0.01% interest while inflation runs at 3%, your money loses purchasing power. The account is safe — you can withdraw the full $10,000 whenever you want — but it buys less than it did before. This is a reason to shop for higher interest rates, not a reason to distrust banks.
If you hold investments through a bank (stocks, bonds, mutual funds), those are not covered by FDIC insurance. Investments are covered by a different system called SIPC (Securities Investor Protection Corporation), which protects up to $500,000 per account if the brokerage fails. But the investments themselves can lose value, and that loss is not covered by any insurance.
Online Banks and Credit Unions
Online banks have the same FDIC protection as traditional banks. The FDIC does not distinguish between a bank with physical branches and a bank with no branches at all. If the online bank is FDIC-insured (and most are), your deposits are covered up to $250,000 per account type.
Credit unions are insured by a different agency called the National Credit Union Administration (NCUA), but the coverage is identical: $250,000 per person per credit union. If you have accounts at both a bank and a credit union, they are insured separately, so you can have $250,000 at each.
You can verify that a bank or credit union is insured by searching the FDIC or NCUA website. Enter the institution's name, and the site tells you whether it is insured and what the current coverage limits are. If a bank is not listed, it is not insured, and you should not keep money there.
How to Maximize Your Coverage
If you have more than $250,000 to save, you can keep all of it insured by spreading it across multiple banks. Open a savings account at Bank A with $250,000, a savings account at Bank B with $250,000, and so on. Each account is insured separately, so your total coverage equals the number of banks times $250,000.
You can also use different account types at the same bank to increase coverage. A savings account and a checking account are insured separately, as are individual accounts and joint accounts. An IRA at the same bank is insured separately as well. If you have $250,000 in a savings account, $250,000 in a checking account, and $250,000 in an IRA, all at the same bank, all three are covered in full.
Some people use a service called IntraFi (formerly Promontory Interbank Network) to automate this spreading. You deposit money into one account, and IntraFi automatically splits it across multiple banks, keeping each portion under $250,000. The service is offered by some banks and credit unions for free. You still have one login and one statement, but your money is insured across multiple institutions.
What to Do If You Suspect Fraud
If you notice unauthorized transactions in your savings account, contact the bank when ready. Federal law requires banks to investigate unauthorized transfers and to refund your money if the bank cannot prove you authorized the transaction. The timeline depends on the type of transaction: for debit card fraud, you have up to 60 days to report it; for wire transfers, the window is shorter.
The bank will freeze the account, investigate, and either refund you or explain why it believes you authorized the transaction. If the bank refuses to refund you and you disagree, you can file a complaint with the FDIC or the bank's primary regulator. The regulator can force the bank to reconsider.
Fraud is different from FDIC insurance. Insurance protects you if the bank fails. Fraud protection protects you if someone steals from your account. Both exist, and both are required by law.
Frequently Asked Questions
Is my money safe if the bank goes out of business?
Yes, up to $250,000. The FDIC insures deposits and pays you back if the bank fails. The bank's business problems do not affect your account — the FDIC steps in before you lose money. Bank failures are rare, and the FDIC has never run out of money to pay depositors.
What if I have more than $250,000 to save?
Open accounts at multiple banks. Each bank insures up to $250,000 per person, so spreading your money across institutions keeps all of it covered. You can also use different account types (savings, checking, IRA) at the same bank, as each is insured separately.
Are online banks as safe as regular banks?
Yes. Online banks have the same FDIC insurance as brick-and-mortar banks. The FDIC does not distinguish between them. Verify that the online bank is FDIC-insured by searching the FDIC website — most are, but it takes 30 seconds to confirm.
Does FDIC insurance protect me from scams?
No. FDIC insurance protects you if the bank fails. If you send money to a scammer or authorize a fraudulent transfer, that is a different protection called fraud protection. Banks are required by law to investigate unauthorized transactions and refund you if you did not authorize them.
What if I keep my savings in cash at home?
Cash at home is not insured by anyone. If it is stolen, lost, or destroyed, you have no recourse. A savings account at an FDIC-insured bank is safer because the bank is required to protect it and the FDIC insures it against the bank's failure.