Federal Deposit Insurance Corporation (FDIC)

The FDIC is the Federal Deposit Insurance Corporation. It was created in 1933 to prevent further bank failures on the scale of Great Depression of 1929. It is an independent agency of the Federal government, and receives no Congressional appropriations. Instead, it is funded by premiums from banks and from earnings on its investments in U.S. Treasury bonds.

The FDIC insures savings, checking and other deposit accounts of up to $250,000 per account ($500,000 per joint account). This new limit was permanently added thanks to the Dodd-Frank Bank Reform Act. In total, the FDIC insures more than $3 trillion of deposits in U.S. banks.

The FDIC also examines and supervises about 5,250 banks, more than half of the total system. When a bank fails, the FDIC immediately steps in. It usually sells the bank to another one, and the customers are transferred to the purchasing bank. Most of the time, the transition is seamless from the customer's point of view.

FDIC insurance prevents widespread bank panics by maintaining confidence in the banking system.

During the Great Depression, the Federal Reserve allowed liquidity to fall, which caused many banks to become bankrupt. As banks went out of business, depositors started to panic and withdraw all their deposits. This caused more banks to go out of business, creating a domino effect. Eventually, most people felt their money was safer under their mattress than in a bank. This took more money out of circulation, creating widespread deflation and further deepened the Depression.

By preventing bank panics, the FDIC helps prevent another Great Depression.

The FDIC insures your savings, checking and money market accounts as well as Certificates of Deposit, of up to $250,000 per account per bank. If you save more than $250,000, keep it in a separate bank so it is insured.

The FDIC also insures individual retirement accounts (IRAs) and Keoghs of up to $250,000. The FDIC's Electronic Deposit Insurance Estimator can help you determine if you have adequate deposit insurance for your accounts.

Also, use FDIC's Bank Find to make sure your bank is insured.

The FDIC does not insure securities or mutual funds even if offered by a bank. (See Insured and Uninsured Investments to see what is and is not protected by FDIC insurance.)