NEW YORK—Recent turmoil in the banking industry may have you worried about your money.
Shares of PacWest, a small regional bank based in Los Angeles, plunged almost 40% Thursday after the company confirmed it may put itself up for sale. Anxiety over potential bank runs has sent shares of smaller banks tumbling. A bank run is when large numbers of people withdraw their money from a bank all at once.
Since March, three regional banks have failed—Silicon Valley Bank, Signature Bank, and First Republic Bank.
Is My Money Safe?
Yes, if your money is in a U.S. bank insured by the Federal Deposit Insurance Corporation (FDIC) and you have less than $250,000 there. If the bank fails, you'll get your money back.Nearly all banks are FDIC insured. You can look for the FDIC logo at bank teller windows or on the entrance to your bank branch.
If you have over $250,000 in individual accounts at one bank, which most people don’t, the amount over $250,000 is considered uninsured and experts recommend that you move the remainder of your money to a different financial institution, said Caleb Silver, editor in chief of Investopedia, a financial media website.
If you have multiple individual accounts at the same bank, for example a savings account and certificate of deposit, those are added together and the total is insured up to $250,000. (Read on for more about how joint accounts are protected.)
Federal officials have been taking steps to make sure other banks aren’t impacted.
Are There Red Flags I Should Look for With My Bank?
If you are worried about your bank closing in the near future, there are some things you can watch out for, according to Silver:— Watch the stock price.
— Keep an eye on the quarterly and annual reports from your bank.
— Start a Google alert for your bank in case there are news stories about it.
You want to make sure you pay close attention to the way your bank is behaving, Silver said.
“If they’re trying to raise money through a share offering or if they’re trying to sell more stock, they might have trouble on their balance sheet,” said Silver.
Should I Look for Alternatives?
If you have more than $250,000 in your bank, there are a few things you can do:— Open a joint account
You can protect up to $500,000 by opening a joint account with someone else, such as your spouse, said Greg McBride, chief financial analyst at Bankrate, a financial services company.
“A married couple can easily protect a million dollars at the same bank by each having an individual account and together having a joint account,” McBride said.
— Move to another financial institution
Moving your money to other financial institutions and having up to $250,000 in each account will ensure that your money is insured by the FDIC, McBride said.
— Do not withdraw cash
Despite the recent uncertainty, experts don’t recommend withdrawing cash from your account. Keeping your money in financial institutions rather than in your home is safer, especially when the amount is insured.
“It’s not a time to pull your money out of the bank,” Silver said.
Even people with uninsured deposits usually get nearly all of their money back.
How Long Does It Take for Insured Money to Be Available if a Bank Fails?
Historically, the FDIC says it has returned insured deposits within a few days of a bank closing. The FDIC will either provide that amount in a new account at another insured bank or issue a check.How Much Money Can Be Insured in Joint Accounts?
If you have a joint account, the FDIC covers each individual up to $250,000. You can have both joint and single accounts at the same bank and be insured for each.What About Other Investments?
Customers should take a close look at the types of investments they have in their bank to know how much of their assets are insured by the FDIC. The FDIC offers an Electronic Deposit Insurance Estimator, a tool to know how much of your money is insured per financial institution.FDIC deposit insurance covers:
—Checking accounts—Negotiable Order of Withdrawal (NOW) accounts—Savings accounts—Money Market Deposit Accounts (MMDAs)—Certificates of Deposit (CDs)—Cashier’s checks—Money orders—Other official items issued by an insured bank
FDIC deposit insurance doesn’t cover:
How Does a Credit Union Compare to a Bank?
Both credit unions and banks allow customers to open savings and checking accounts, among other financial products.The key difference is that credit unions are not-for-profit institutions, which tends to translate into lower fees and lower balance requirements, while banks are for-profit. Sometimes it also means that it’s easier for credit union customers to be approved for loans, McBride said.
Usually, customers are allowed to join credit unions based on where they live or work.
Credit unions serve a smaller number of customers, which also allows for a more personalized experience. The tradeoff is that banks tend to have larger staff, more physical branches and newer technology.
“Whether at a bank or a credit union, your money is safe. There’s no need to worry about the safety or access to your money,” McBride said.