FDIC stands for Federal Deposit Insurance Corporation. It was formed in the 1930s in response to the banking crashes that accompanied the Great Depression. It’s designed to keep America confident in its banks, but it also provides real-world safeguards for your money by doing precisely what its name implies: insuring your bank deposits.1 During the 2008 housing crisis, the FDIC took control of failing banks, protecting billions of dollars in assets.2
Just like you pay car insurance premiums, American banks pay premiums to the FDIC. The FDIC in turn uses that money, plus other federal funds, to repay customers if a bank fails. The agencyinsures most American banks, making it responsible for trillions of dollars in deposits. It also regulates those banks, monitoring their health in an effort to avoid collapse.1
The FDIC insures several categories of deposit accounts. That includes what the agency calls single accounts, which covers checking accounts, savings accounts, money market accounts and certificates of deposit (CDs).3 But investments like stocks, bonds, mutual funds and other equities are not covered.4
The FDIC also limits how much money can be insured in a given account, meaning there are limits to what you can be paid back in the unlikely event that your bank closes. By getting to know theFDIC limitsand how they work, you'll have the know-how to make the system work for you.
