What you need to know about bank failures

The failures of Franklin Bank in Texas and Security Pacific Bank in California last week, brings the number of banks that have folded this year to 19. This isn’t necessarily cause for worry, since nearly all bank and credit union savings accounts, money-market accounts, and CDs are federally insured temporarily for up to $250,000 per depositor. But you might encounter some hassles if your bank closes.

What to do. Keep your balances within the coverage limits. The FDIC's estimator will help you determine how much of your money in various bank accounts is fully covered. It also shows you how to split your money between multiple accounts to insure large amounts of money.

You can check the health of your bank or credit union with Bankrate.com's Safe & Sound ratings and TheStreet.com’s Ratings Screener.

If your bank fails, insured accounts and CDs will likely be seamlessly transferred to a new bank. At worst it could take you a few days to access your funds. Keep copies of your statements and deposit slips, especially if you bank online, to make sure your balances in the new bank are correct. If you have over $250,000 in a bank that goes under, you can petition the FDIC to recover the excess cash, though you’ll probably only get a portion of it back and not in a timely manner. If your bank gets absorbed by a new one, check to see if your interest rates, fees, or terms have changed.

There are a few things you might not know about federal insurance:

• Bank gift cards are rarely covered, so use them up quickly.
• Safety deposit boxes aren’t FDIC insured. Though there’s usually no problem gaining access to them if a bank fails, you may want to see if the contents are covered under your homeowner’s or renter’s insurance. 
• Brokerage CDs, sold through firms like Fidelity or Schwab, can take a little longer to sort out if a bank fails because they’re often registered in the name of the broker, not in your name. Also, if your broker has opened the CD at a bank where you already have deposits you could inadvertently be over the federal limit.
• The $250,000 limit expires at the end of 2009, when it reverts back to $100,000. So don’t take out long-term CDs that might leave some of your money unprotected when that happens. Spread your money around before the limit expires. —Chris Fichera

Comments

[bubsy seo test]

thanks nice tips!!i admire it!

[Zach54]

I spoke with my banker the other day who told me that there is some fine print associated with FDIC. The fed has "up to 99 years" to give you your money back. I'm assuming that in the case of a widespread meltdown, if 50 million people tried to get back all their lost savings it would bankrupt the govt. And seeing as how I just got back the rest of my income tax refund after an IRS error (9 months after I filed), I don't have much faith in an efficient and timely FDIC refund should it ever come to that.