The FDIC recently launched a campaign called “Know Your Risk. Protect Your Money.” Its aim is to increase public awareness of deposit insurance. The campaign will run through November 2023 and help provide consumers and businesses with clear information about the role of FDIC insurance in the banking industry. With a clear understanding of what FDIC insurance protects – and what it does not – leaders can ensure that their company’s cash is safe from bank failure.
Why is the FDIC Running This Campaign?
The FDIC’s public awareness campaign was launched after a Gallup poll showed nearly half of Americans worry about the safety of their bank deposits. This fact is understandable given that three of the four largest bank failures in American history occurred in 2023. In light of the bank failures, FDIC Chairman Martin J. Gruenberg said, “this is an important moment for the FDIC to reach out to the public and ensure that more consumers understand deposit insurance and how it protects their money.”
In addition to easing public fears about bank failures, the FDIC also noted the importance of providing clear, accurate information about FDIC coverage. This information is especially important now because of an increased amount of misinformation surrounding deposit insurance. The FDIC has even noted instances where organizations have misused the FDIC name and logo to spread incorrect information.
FDIC Insurance Provides the Ultimate Protection Against Bank Failure
While there has been misinformation about the role of the FDIC, one thing remains clear – FDIC insurance offers the ultimate protection for business cash. In fact, the FDIC was created in 1933 with the purpose of protecting consumers and businesses from bank failure. The agency accomplishes this goal by monitoring banks to ensure they remain solvent and protecting deposits in the event of bank failure.
As a government agency, the FDIC is backed by the full faith and credit of the U.S. government. Therefore, there is no stronger protection for business deposits. In fact, no depositor has lost a penny of insured funds since the FDIC was established 90 years ago.
FDIC insurance is automatic, and businesses aren’t required to apply or pay for coverage. Rather than the depositor paying for deposit insurance, the bank pays a small fee to the FDIC which covers the cost of insurance.
The FDIC Does Not Protect All Assets or All Financial Institutions
There are two main factors that determine if cash is covered by the FDIC – the type of financial institution and the type of account. FDIC insurance only covers one type of financial institution – member banks.
Fortunately, there are more than 4,600 member banks with close to 80,000 branches nationwide, so businesses have plenty of options when deciding where to invest their funds. The FDIC provides a BankFind Tool to make it simple to check if a bank is covered.
In addition to the type of financial institution, the type of account a business opens also determines if cash is covered by the FDIC. There are four main types of accounts that the FDIC covers – checking, savings, Money Market Deposit Accounts, and Certificates of Deposit. On the other hand, the FDIC does not cover investments such as stocks, bonds, mutual funds, and cryptocurrency. The FDIC also does not cover insurance contracts like annuities or life insurance policies.
FDIC Insurance Is Limited
While the FDIC provides the ultimate protection for business cash, there is a limit to FDIC coverage. This limit has been raised several times since the FDIC was established and currently stands at $250,000 per ownership category at each insured bank. ‘Ownership category’ means that all accounts owned by the same person, acting in the same capacity are treated as one account for FDIC insurance purposes. On the other hand, accounts owned by corporations, partnerships, and unincorporated associations are treated separately from the accounts of any owner or employee.
The combined value of all accounts owned by the same person in the same ownership category are insured up to the $250,000 limit – which includes both principal and accrued interest. However, funds above this limit are still subject to risk.
Securing Extended FDIC Protection with Fintech
Businesses often have far more than $250,000 in cash, which can leave thousands or even millions of dollars unprotected. Since the FDIC limit is per bank, a business could manually split cash between multiple banks to achieve full protection. However, this process is time-consuming and multiple accounts can be difficult to reconcile.
Advanced financial technology – commonly shortened to fintech – offers a simple solution to achieve full deposit protection. With fintech-powered deposit management, companies can realize the benefits of multiple banking relationships without the hassle.
Full Deposit Protection with Marketplace Banking™ By ADM
Our company, the American Deposit Management Co. [ADM] uses proprietary fintech we call Marketplace Banking™ to provide access to extended deposit protection. We accomplish this by spreading business cash across our nationwide network of banks and credit unions that compete for deposits. Each of these financial institutions is a member of the FDIC or NCUA and thoroughly vetted by our team to ensure they are well capitalized.
With Marketplace Banking™ businesses get the benefits of multiple banking relationships – like extended FDIC / NCUA insurance – with one account and one consolidated monthly statement. In addition to full protection from bank failure, our clients receive nationally competitive yields and liquidity to match their needs. To learn more and get started today, contact us.
*American Deposit Management Co. is not an FDIC/NCUA-insured institution. FDIC/NCUA deposit coverage only protects against the failure of an FDIC/NCUA-insured depository institution.