Are CDs FDIC Insured?
Written by
Preston Hartwick
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Susan Kim
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When considering where to keep your hard-earned money, you want to be sure of two things: that the investment is safe and that it’s insured. This is especially true when it comes to certificates of deposit.
The U.S. government established the Federal Deposit Insurance Corp. to insure deposits made to banks. Here are the details about FDIC insurance when it comes to CDs.
Are CDs FDIC Insured?
Yes, CDs at banks carry FDIC insurance up to $250,000 per person, per bank. If you have a balance exceeding $250,000, you should consider diversifying your funds across multiple banks to maintain full coverage. Note that funds deposited at different branches of the same bank are not separately insured.
Here are some key takeaways to know:
- The FDIC only insures deposits made to banks and savings associations.
- The FDIC does not insure investments made with securities firms, mutual funds or other types of investments.
- When you purchase a CD from a bank, you are entering into a contract with the bank. If the bank fails, the FDIC will reimburse you up to the FDIC insurance limit of $250,000 per depositor, per bank, per account ownership category.
- Even if you have multiple “single” accounts — meaning you are the only owner — at the same bank totaling more than $250,000, the FDIC will only insure your accounts up to this limit. However, if the deposits are maintained in different categories of legal ownership, such as a trust with more than one beneficiary, it’s possible to be insured for more than $250,000 at the same bank.
What Happens to My CD If the Bank Fails?
The funds in all deposit accounts, including CDs, remain secure even if the FDIC-insured bank fails. In the case of a failed bank, another bank may acquire the failed bank and assume all of its deposits. If this happens, you will then become a depositor at that bank.
If another bank doesn’t acquire the failed bank, the FDIC will pay each depositor via check up to the insured balance in their accounts. Federal law requires the FDIC to make these payments as soon as possible, which typically happens within a few days after the bank’s failure.
What Is FDIC Insurance?
The FDIC is a government agency that insures deposits made to banks and savings associations. It was established in 1933 as a response to the banking crisis of the Great Depression. The FDIC protects customers’ deposits of up to $250,000 per depositor, per bank, per account ownership category.
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The FDIC insures deposits in the form of checking and savings accounts, CDs, money market accounts and certain other accounts. It does not insure investments made in stocks, bonds, mutual funds or other securities.
What Is the FDIC Insurance Limit on CDs?
The FDIC insurance limit on CDs is $250,000 per depositor, per bank. If you have multiple accounts at the same bank, your combined balances will be insured for up to $250,000 total.
The FDIC also insures joint accounts and trust accounts up to $250,000 per owner. This means that if you have multiple CDs with multiple owners at the same bank, each owner will be insured up to the FDIC insurance limit of $250,000.
Opening up different categories of accounts in the same bank is one way to maximize your FDIC insurance coverage. For example, certain retirement accounts, employee benefit plan accounts, government accounts and trust accounts are eligible for FDIC insurance.
What CDs Are Not FDIC Insured?
A few types of CDs are not FDIC insured, including foreign CDs and Yankee CDs. Foreign CDs are issued by foreign banks and do not qualify for FDIC insurance. Yankee CDs are issued by foreign banks that have branches in the U.S.; these CDs are available in U.S. denominations but are not insured.
Furthermore, not all banks are insured by the FDIC, which means you could be putting your hard-earned money at risk. CDs issued by banks that are not FDIC insured can be significantly riskier than FDIC-insured investments, so it’s crucial to do your research before you invest. To ensure your investment is FDIC insured, read the fine print and check that the bank is a member of the FDIC using the FDIC’s BankFind Suite.
Are There Any Risks With CDs?
Even though CDs at banks are typically FDIC insured, there are still some risks associated with investing in them.
Fraud
Most importantly, never purchase a CD from a deposit broker with a history of complaints or fraud. Anyone can claim to be a deposit broker. They do not need any formal licenses or certifications.
Before buying a CD through a broker, check their disciplinary history through the Securities and Exchange Commission and FINRA databases.
Market Risk
Another risk of CDs comes in the form of market risk. This means that inflation may outpace the growth of your CD interest, eroding your returns over time.
Maturity Date
In addition, be aware of the CD’s maturity date. You cannot withdraw your locked funds until the CD reaches maturity, which may be within as little as 30 days but could be five or 10 years in the future. If you do want to withdraw your funds before the CD matures, you may end up paying a hefty fee.
Before purchasing a CD, double-check the maturity date and make sure you’re really able to leave the funds locked in that long.
Are Online CDs Safe?
If you open a CD online at an FDIC-insured banking institution, including an online-only bank, the CD is protected under the same coverage as a CD opened in person at a brick-and-mortar bank. As previously mentioned, you can use the FDIC’s BankFind Suite to verify whether a financial institution is insured.
Key Takeaways
Investing in CDs can be an excellent way to grow your savings. However, it’s essential to understand that not all CDs are FDIC insured. To ensure your deposits are insured, be sure to purchase CDs from a bank that is FDIC insured. Additionally, be aware of the FDIC insurance limit of $250,000 per depositor, per bank, per account ownership category. Finally, remember that the FDIC does not insure losses due to fraud or theft.
Cynthia Measom contributed to the reporting for this article.
The article above was refined via automated technology and then fine-tuned and verified for accuracy by a member of our editorial team.
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- FDIC. 2024. "Deposit Insurance FAQs."
- FDIC. 2024. "Your Insured Deposits."
- Citizens Bank. "Are CDs FDIC insured, and how safe are they?"
