With the COVID-19 pandemic wreaking havoc throughout the global economy, you may well wonder whether a bank savings account is still the safest place to keep your money.
The answer is yes. In fact, bank savings accounts are much safer than a wad of cash in your wallet, an envelope in your desk drawer or even a fake head of lettuce in your refrigerator. That’s because banks have sophisticated security systems and technologies to protect your money and guard against theft and fraud. What’s more, most bank deposits are insured by an agency of the federal government.
Why Is Your Money Safer in the Bank?
Here are four reasons why bank accounts are super safe:
- FDIC insurance. Most deposits in banks are insured dollar-for-dollar by the Federal Deposit Insurance Corp. This insurance covers your principal and any interest you’re owed through the date of your bank’s default up to $250,000 in combined total balances.
You don’t have to apply for FDIC insurance. This protection is provided automatically when you open an account. The types of accounts that are covered include checking, savings, money market deposit and certificates of deposit.
To find out if your bank is FDIC-insured, you can contact the bank and ask, look for an FDIC sign at the bank’s premises, call the FDIC at 877-275-3342, or look up the bank in the FDIC BankFind directory.
- NCUA insurance. Most deposits in credit union share accounts are insured by the National Credit Union Administration, which is also backed by the federal government. As with the FDIC, the NCUA insures individual customers up to $250,000 in total deposits.
- Capital requirements. After the 2008 financial crisis, the federal government imposed stricter regulations for U.S. banks to help ensure their safety and soundness. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 increased the amount and types of capital that banks must have to help them stay solvent.
- Protection from fire, flood or theft. Cash can be stolen, damaged or destroyed. If you keep cash in your home or car, your homeowners or renters insurance, if you have any, may not cover the full amount due to those types of losses. Money deposited in a bank account isn’t subject to those risks.
What if You Have More Than FDIC Insurance Limits?
The standard FDIC insurance amount is $250,000 per depositor, per FDIC-insured bank, per account ownership category. Examples of ownership categories include a single account, joint account, trust account or corporate account.
You can have more than $250,000 of insured deposits at one bank if your accounts have different ownership categories.
If your deposits in one ownership category exceed $250,000 and you want to ensure that all of your funds are covered by federal insurance, you could open accounts at more than one bank.
The FDIC website provides details about account categories and an Electronic Deposit Insurance Estimator, or EDIE, to help you figure out whether your accounts are insured.
Why Your Savings Account May Be Safer Than Your Checking Account
Savings accounts are generally considered safer than checking accounts due to the risk of debit card fraud.
A skimmer is an electronic device that can capture card numbers from an ATM or payment card reader.
Some financial advisors recommend that you keep small amounts of cash at home in case of an emergency or natural disaster or if you’re strictly quarantined.
You may want to invest in a fire-resistant safe for added protection.’