What Happens to My Money if a Bank Goes Bankrupt?

When most people think of keeping their money safe, their minds automatically go to putting everything in the bank. Financial institutions are mainly safe, but they're not immune to bankruptcy.

Banks can fail, go out of business, and get bought up by other companies. It happens more frequently than people realize. At least a handful of banks go out of business each year.

If that were to occur at your bank, what would happen to your money?

FDIC to the Rescue

What happens to your money depends on the bank itself and the type of account you have. You can breathe a little easier if you have an FDIC insured checking account.

Most consumer checking accounts and financial products have FDIC insurance. The Federal Deposit Insurance Corporation (FDIC) is a government agency that insures deposit accounts. That includes traditional checking accounts, savings accounts, CDs, etc.

FDIC typically covers $250,000. That applies to single and joint accounts. It also covers each beneficiary in a revocable trust and the deposited amount of retirement accounts. Unfortunately, the FDIC insurance doesn't apply to investments for retirement or money market accounts.

Do You Have an FDIC Insured Checking Account?

Always ensure that you're getting FDIC coverage when opening a checking account. Usually, banks will have official FDIC signage at bank locations, on websites, and within apps. They make the coverage well-known, so you should have no problem checking.

You can also call the FDIC's toll-free number or perform a search on the official website to learn about your bank's coverage. If you don't have FDIC coverage, you may want to consider moving your money. Financial experts also recommend splitting your money into multiple accounts if you have more than $250,000 in liquid assets.

Getting Your Money Back

When a bank experiences financial straits, the panic that ensues is always stressful. But don't let yourself be a part of it. Resist the urge to withdraw all your money when you hear of bankruptcy.

Not only does that put you at risk, but you'll likely find that all funds are frozen anyway. Be patient. The FDIC usually takes several days to take care of administrative duties. Your money will move to another bank that acquires the deposit accounts, or the FDIC will send you a check directly.

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Why You Should Stop Opening Credit Cards

Thinking about getting another credit card? Maybe you should read this blog and reconsider!

Credit cards can be an excellent tool for covering unexpected expenses. Using a line of credit wisely can also help you secure a better financial future. But overdoing it could have the opposite effect. Here are a few reasons why you should stop opening credit cards.

Credit Hits

Did you know that high credit utilization can significantly harm your credit score? Having credit is necessary to maintain a credit score, but that doesn't mean you should pile on the debt!

Credit utilization refers to how much of your credit you're using. It's the sum of your balances across every card! While there's nothing wrong with some utilization, anything over 30 percent can affect your score negatively.

Opening more credit cards only makes that figure worse.

Plus, you have to think about how applications factor into the equation—every application for new card results in a hard credit inquiry. Too many of those, and your score will decline, too.

Payment Difficulties

It's easy to get lost in the possibilities of a high credit limit. But what happens when those payments come due? If you're looking to decrease debt with low income, credit cards aren't the way to do it.

Even if you make the minimum payment and nothing more, you'll still have several bills with multiple credit cards. Those payments add up, turning your shopping spree into a nightmare financial situation.

A Revolving Door of Debt

Opening several credit cards can put you into a never-ending cycle of debt. It makes your attempt to decrease debt with low income a near impossibility.

Some people like to open new cards to transfer the debt, moving one balance to another card. That technique does nothing to reduce your debt. If anything, it increases it with changing APRs and extraneous fees.

Credit cards often have a high APR as it is. Racking up debt only makes things harder to pay off. In the end, you might pay several times more than the initial purchase.

Taking Charge of Your Finances

If you want to improve your financial situation, the first step is to stop opening new credit cards. Having a line of credit open for emergencies is good, but resist the urge to open new store cards and accounts. You'll thank yourself later when you avoid the common pitfalls of revolving credit card debt.

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