What Is Your Level of FDIC Insurance Knowledge?

Recognized by many Americans via the logo located on their financial institutions brochures, documentation, and statements, the FDIC brand name has been around for longer than seven decades with the primary goal of guaranteeing the safety of depositor funds, educating you and providing helpful resources within the banking industry, and overseeing certain institutions for the assurance of security and dependability.

  • The Top Ten Misconceptions List – Prevent and safeguard yourself from repeating the foremost blunders of a handful of people by reviewing the following discussion based misconceptions list of conversations that actually took place between an FDIC deposit insurance specialists and depositor.
    1. Do you presume that upon bank failure that all account deposit amounts are lumped together and insured as a combined total or that the FDIC tracks the money in the financial institutions, in all actuality the accounts that qualify for FDIC insurance will be insured individually, not collectively and do not worry the FDIC does not monitor your account amounts.
    2. Do you believe, like several depositors, that the insured amount determination factors in account titles are enhanced by shuffling names on joint accounts or reordering social security numbers will increase insurance coverage, this does not affect coverage since the FDIC calculates each person’s share of all the joint accounts within the same institution insuring totals up to the $100,000 limit.
    3. Did you know that in the event of a failed bank some believe that it takes an excessive length of time to receive depositor payments on insured accounts, the truth of the matter is, in accordance with federal law, that the FDIC must pay as soon as possible and historically have made payouts within a few days of banks closure.
    4. Where you knowledgeable that some question the repayment amount when a financial institution fails and whether or not it is just a percentage of the whole, this information, occasionally spread via financial advisors and sales folks, is false because federal law requires the FDIC pay 100 percent of insured deposits, which includes principal and interest, up to the federal limit.
    5. Do you hold the mistaken belief that FDIC insurance coverage is applicable to the various individual bank branches that they patronage and not the institution as a whole and this is just not the case, accounts held within an establishment are considered the same for insurance purposes and instead are broken down into ownership categories (e.g. single, joint, and retirement).
    6. Do you know whether all bank products sold contain insurance coverage that the FDIC provides, some think this is true but it is not, through the years banks have added many product offerings (e.g. stocks, bonds, mutual funds, annuities, and insurance products) that are uninsured by the FDIC and have been federally regulated to be disclosed as such.
    7. Were you aware that each Individual Retirement Account beneficiary does not increase the insured coverage amount, the confusion seems to stem from per-beneficiary rules relates to revocable trust accounts, which declare that deposits provided by a consumer in a assortment of retirement accounts (e.g. traditional and Roth IRAs) are insured up to $250,000 within a single organization.
    8. Do you misunderstand revocable trust accounts, which are accounts that beneficiaries receive funds upon a depositor’s death, also known as payable-on-death or living trust accounts, where each beneficiary is insured up to $100,000, the reality is that the depositors list of "qualifying beneficiaries" (e.g. spouse, child, grandchild, parent, or sibling) are eligible for the entire insured amount.
    9. Another revocable trust account misconception is that each owner and each beneficiary have up to $100,000 of insurance and this is incorrect because FDIC insurance calculations are on a single account and each qualifying beneficiary, which means that the owner and his or her child as the beneficiary have insurance for up to $100,000 and not $200,000.
    10. Do you share the confusion of some in terms of dealing with the estate of a deceased persons account by thinking that each person is eligible for inheriting money will receive $100,000, the mix-up comes from an assumption that the FDIC‘s per-beneficiary option applies to a deceased persons estate account which it is does not.
  • What Is New with FDIC Insurance – Retirement deposit insurance coverage has increased to $250,000 for applicable combined totals that a consumer maintains at a single financial institution do to the result of a new law, reported about back in April 2006, which includes IRAs, self-directed Keogh, "457 plans" for state government employees, and 401(k) accounts.
  • Best Practice for Insuring a Large Sum of Money – Have you been fortunate enough to have completed a home sale, receive an inheritance, acquire a pension payment, or insurance claim and now have a substantial sum of money, maximize your FDIC insurance coverage within one bank by depositing those funds into single, joint, and certain trust accounts with different ownership categories since each category is insured separately.
  • Easy to Use DIY Deposit Insurance Calculator – Have you ever wondered if your deposits are within the insurance coverage limits or how to calculate the amounts of your bank accounts, the FDIC has created an interactive calculator known as the Electronic Deposit Insurance Estimator (EDIE), which enables simple account information entry and intuitive placement of information into the appropriate insurance categories based on the answers you provide.
  • Debit Card Questions and Answers – The attractiveness and commonality of debit cards has amplified and in turn this has generated a lot of interest about why one would even want or need such a financial product, the FDIC has taken the time to address inquiries these and more.
    • Comparable to a credit card the debit cards usage is similar but acts like a check in that it withdraws the purchase payment (i.e. debit) from your financial institutions checking or savings account.
    • People use debit cards mostly for the elimination of having to write a check, ability to transact a large purchase, removal of needing to carry cash, and all around general convenience.
    • Costs associated with debit cards depend upon your bank and might or might not include account overdraft fees, non-accountholder ATM usage charges for establishments that you are not a member of, and potential fees related to entering or using your PIN for a transaction.
    • Similar to checks, debit cards have the ability to overdraw your bank account when you have inadequate funds and cannot cover a purchase, since these purchases occur electronically they are much faster than waiting for a check to clear so it is mandatory that the money be available prior to use.
    • Given the right circumstances you may experience a temporary block or holding of funds on a debit card purchase, this is a step used by merchants to thwart against fraud, issues, or losses and primarily seen when reserving a service or verifying an estimated purchase price.
    • When making purchases with a debt card do not expect to have the features that are available to checks such as stop payments since the money comes out of your account instantly, you more than likely will be able to return merchandise for a refund but that depends upon the merchants return policy.
    • Signing your name versus entering a PIN in order to obtain debit card transaction approval may have a few differences such as attempting to get cash back, similar to an ATM visit, or the amount of time it takes for the transaction to post to your account.
    • Debit cards a susceptible to fraud just as credit cards so guard your account number, expiration date, security code, and PIN from prying eyes, never give account information via the phone or internet unless you have initiated contact, monitor the account attached to your debt card for nefarious transactions, and never write your PIN down, instead just memorize it.
    • If you become victim of debit card fraud you do have federal consumer protections provided by the EFTA, which protects against errors, loss, and theft but limits liability to $50 if the cardholder notifies the bank within two business days, otherwise you could lose up to $500 or more, but many banks do not holder customers responsible for unauthorized transactions.
  • Do Not Travel To a Foreign Country without Preparing Financially – Planning on leaving the country anytime soon and unsure about paying for the expenses you will encounter in a foreign country, sharpen your financial traveling skills before going abroad, carry little cash, consider taking two credit cards or travelers checks, verify that your debit card will work, plan for ATM fees and locations, and look into the currency exchange rates.

"Consumer News Spring 2006." FDIC. Federal Deposit Insurance Corporation, . Web. .

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