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.

Read a similar article about tracking your household bills here at this page.