Are Your Bank Deposits Safe? Here’s How to Verify

The sudden collapse of Silicon Valley Bank (SVB) has dominated headlines for over a week now. And I don’t think we’ve seen the last of it. In fact, I think it’s only the beginning of banking woes, and many more unfortunate failures to come.

The Fed and Treasury are trying to reassure everyone that everything’s fine — but I think it’s rather obvious that while most depositors will regain access to their funds, they were lucky this time… and that luck could run out. To that end, here’s a timely reminder of what to do if you have a large amount of cash you’re sitting on.

If you’re single:

Don’t put more than $250,000 in a single qualifying bank (multiple accounts in the same bank won’t help you if they’re in the same “ownership category.” Check with your banker to make sure you haven’t accidentally over-extended an ownership category). Diversify your holdings in different banks, especially if you’re using a smaller, local bank.

If you’re married:

The FDIC covers $250,000 for individual qualified accounts, but also up to $250,000 for each co-owner of a joint account. So you can get $1 million of FDIC coverage by having a personal bank account in your name, a personal bank account in your spouse’s name, and a joint account. You’ll still want to be careful to clarify which “ownership categories” they fall under, especially if you have large trusts that exceed these amounts.

Also, there’s nothing wrong with using local, small banks (I for one often prefer them to the soulless conglomerates out there) but you DO want to be smart about not leaving all your eggs in one local basket.

And don’t forget that the FDIC doesn’t cover stocks, bonds, mutual funds, cryptos, annuities, life insurance policies, municipal bonds (munis), or treasury bills. There’s SIPC that covers the value of your brokerage accounts in the event of brokerage failure.  SIPC goes up to $500,000 per institution, but a warning: only $250,000 of that can be cash. So if you just cashed out a large position, you won’t want to leave it sitting there exposed for too long.

There are also three often-overlooked strategies that we also recommend...

3 PRO Tips for Additional Protection

1. Beneficiaries. The FDIC provides $250k protection for each unique beneficiary listed on an account (and as long as they’re not already a named account holder). So this is a great way to pump up your protection for not a lot of extra work — and bonus, it also further ensures your estate wishes are honored.
2. Trusts. By establishing a trust, it becomes its own account holder, and qualifies for its own protection. Depending on your situation, this can be a smart way to intelligently distribute your wealth and know that it’s secure.
3. Credit Unions. Credit unions aren’t covered by the FDIC — but in this case, that’s a good thing. They have their own $250k per person coverage through their own organization, the National Credit Union Administration (NCUA). So using a credit union can help you diversify your holdings. Credit unions also tend to be less directly affected by banking woes on both the national and local level.

And for goodness sakes, don’t leave huge sums of money sitting around anyway! Especially in this high-inflation environment, you’re wasting your money’s earning power.