FDIC Insurance & Other Cash Management Options

FDIC Insurance & Other Cash Management Options

| March 13, 2023

FDIC Insurance – A Review

It’s been a number of years since many depositors have been concerned with the safety of their cash held at Federally Insured Banks.  With recent events, now is a great time to review the Federal Deposit Insurance Corporation (FDIC) coverage limits.

In general, an individual’s bank account will receive $250,000 of FDIC insurance coverage and a joint account will receive $250,000 per owner.  Therefore, a typical joint account with two owners will have $500,000 of coverage.  The FDIC provides separate coverage for deposits held at different banks and in different account ownership categories (listed below).

Let’s use a two-party example; where two individuals have three total accounts at XYZ Bank.  They each have a separate account in their own name and a joint account.  In this scenario, these three accounts would have a total of $1,000,000 of FDIC Coverage. 

Federally Insured Credit Unions have a similar coverage but instead of being covered by the FDIC they are insured by the National Credit Union Share Insurance Fund. Cash and securities held in an SIPC insured brokerage account, such as at TD Ameritrade and Schwab, are insured against insolvency of the firm in a similar way through the Securities Investor Protection Corporation (SIPC).   

Additional information regarding FDIC Insurance can be found here: https://www.fdic.gov/resources/deposit-insurance/brochures/deposits-at-a-glance/

Additional information regarding Credit Union coverage can be found here: https://mycreditunion.gov/share-insurance

Additional information regarding brokerage account coverage can be found here: https://www.sipc.org/for-investors/

Cash Management Strategies

There are times when our clients hold cash in excess of these limits and in those scenarios, we would encourage them to utilize a cash management strategy involving one or more of the following:

  • Accounts using different Ownership Categories
    • Single Accounts (owned by one person)
    • Joint Accounts (owned by two or more persons)
    • Certain Retirement Accounts (includes IRAs)
    • Revocable Trusts Accounts
    • Irrevocable Trust Accounts
    • Corporation, Partnership and Unincorporated Association Accounts
  • Accounts at Multiple Banks
  • FDIC insured Certificates of Deposit (CDs) issued by Multiple Banks
    • Purchased within their brokerage account
  • Treasury Bills, Notes, or Bonds
    • Purchased within their brokerage account or via Treasury Direct
    • Guaranteed by the full faith and credit of the US Government
  • Money Market Funds
    • While not FDIC insured, these funds invest in a diversified portfolio of very short-term and high-quality investments as required by the Securities and Exchange Commission (SEC). Depending on the specific type of money market fund, they will invest in securities of corporations, banks, U.S. government, states, local governments and other municipal agencies, as well as repurchase agreements and asset-backed commercial paper.