- The FDIC insures bank accounts for up to $250,000 per depositor, per ownership category, per bank.
- If a bank fails, insured deposits will be moved to another FDIC-insured bank or paid out.
- You'll usually get a Receiver's Certificate for money that isn't covered by FDIC insurance.
During periods of economic uncertainty, you may be concerned about whether your cash is safe at a bank — but a bank failure is still considered a rare event.
When it does happen, regulatory bodies step in to protect consumers as quickly as possible. Here's what you need to know if your bank fails.
How bank failures occur
Bank failures can be caused in part by insufficient financial management and poor financial health during economic downturns.
Public perception of a financial institution can also impact a bank. If enough customers are concerned about the vitality of a bank, they may simultaneously withdraw their money, triggering a bank run and depleting the institution's cash reserves.
How more US banks could fail
Protection for your deposits
FDIC insurance in the US
In response to the bank failures of the Great Depression, Congress founded the Federal Deposit Insurance Corporation (FDIC) to oversee banks and protect consumer bank accounts through deposit insurance.
Limits and coverage of FDIC insurance
The FDIC insures up to $250,000 per depositor, per ownership category, per bank. (Similarly, the NCUA insures up to $250,000 per depositor, per ownership category for credit unions.)
Checking accounts, savings accounts, money market accounts, and certificates of deposit are examples of FDIC-insured bank accounts. The agency doesn't cover money in investment accounts, even if part of your balance is held in cash.
Single bank accounts and joint bank accounts are examples of different ownership categories. In individual bank accounts, you are insured for up to $250,000. In your joint bank accounts, each person is insured for up to $250,000.
What happens to your money
Immediate steps after a bank failure
When a bank fails, the FDIC will generally make an announcement through the media and a press release that the institution is being shut down. Then, the agency will look to sell the bank's assets to another FDIC-insured institution.
If another bank acquires the assets, depositors will be notified by the FDIC through the mail. There will be a transition process for the new customers so they can learn about the new bank and how it works.
If there isn't a bank that wants to acquire the assets of the failed bank, then the FDIC will send checks for the amount of the insured deposits.
Accessing your insured deposits
The Federal Deposit Insurance Act states that if a bank closes, insured deposits need to be available "as soon as possible." Generally, you can expect to have your money available within two business days of the bank shutting down.
Let's say you had $200,000 in a checking account and $200,000 in a joint savings account with a family member. If your bank closed, you would receive a total of $400,000 from the FDIC.
Now if you had $200,000 in a checking account and $100,000 in an individual savings account, you would only receive $250,000. Since the accounts are in the same ownership category, you would have $50,000 uninsured.
If your bank closes and you have more than $250,000 in an individual bank account, you may be able to get a Receiver's Certificate. A Receiver's Certificate is a document that says you are allowed to claim funds once the bank's assets are liquidated. You could possibly receive payments if there are funds available for distribution, but the FDIC doesn't specify that you'll get all your money back.
Try the FDIC's insurance estimator to determine your current coverage levels.
What happens to loans and mortgages
FDIC representatives will usually be available to meet with loan customers within a day of the bank failure at or near the customer's closest branch location.
Your loan will be sold to another creditor or held by the FDIC and you will be notified within a few days where to send your payments. Your rights and obligation to pay the loan do not change.
Getting help
The FDIC should be available to help if you have questions or concerns after a bank failure. Calls to a failed bank will typically be redirected to the FDIC, or you can call the FDIC directly at the customer service line shared in the announcement posted on the FDIC website.
Steps to take after a bank failure
If a bank fails, the FDIC is in charge of managing its assets. You'll have to wait until your money is moved to another FDIC-insured bank or mailed to you as a check in order to have access to it.
That said, here are a few things you can do to still be on top of your finances if your bank shuts down:
- Review the due dates for bills involving automatic payments or checks you need to send. If your money was moved to another bank, automatic payments and checks will usually be processed without issue (unless the check is for more than what's insured in a bank account). However, if your money was mailed to you as a check, any outstanding payments will be considered unpaid. To avoid any late fees, you'll also want to review the due dates of your bills and find an alternative way to pay, like using a credit card.
- If your money is moved to another bank, learn more about it. Products, services, fees, and policies vary greatly between financial institutions. If your money is moved to another bank, take the time to understand your new institution's structure. During the transition process, you'll usually get information about the bank and how it works. If you have any additional questions, you can also contact the bank's customer support.
- If your money is mailed to you as a check, consider opening a new bank account at an FDIC-insured financial institution. Money deposited into bank accounts will be safe as long as your financial institution is federally insured. If you were mailed a check for your insured deposits, you could open a new bank account at another FDIC-insured bank.
- Track your total deposits to make sure you are protected by FDIC insurance. FDIC insurance covers $250,000 per owner, per ownership category. To help make sure your money is protected in future instances, try tracking your total deposits. If you want to keep more money in the bank than the FDIC will insure, you could open another bank account at a separate bank or choose a bank account that has extended federal insurance coverage. Banks with extended insurance coverage usually have a program where money will be moved to partner banks which will also offer $250,000 per owner, per ownership category.
Bank failure FAQs
What happens to your deposits if your bank fails?
If your bank fails, you will gain access to any FDIC-insured deposits — either as a check or at another bank — within a few days of a bank failure.
How are bank failures handled?
When a bank fails, regulatory agencies step in to sell the failed bank's assets to another FDIC-insured institution. If the assets cannot be sold, the FDIC will directly reimburse customers.
Are all types of accounts covered by FDIC insurance?
All types of accounts are not covered by FDIC insurance. Checking accounts, savings accounts, money market accounts, and certificates of deposit are covered by FDIC insurance. Brokerage accounts holding investments are not covered.
What should you do if your bank fails?
If your bank fails, verify your account balance and look out for snail mail from the FDIC with further instructions.
Can you access your money immediately after a bank fails?
No, you cannot access your money immediately after a bank fails — but you should get it soon. Customers of a bank that has failed will likely gain access to their money within a few days, either by receiving a check from the FDIC for the amount of insured funds or getting a new bank account at another FDIC-insured bank.
