In the aftermath of the financial crisis and ongoing bank seizures across the country, rumors and half-truths regarding FDIC deposit insurance have become widespread. A few are "put on trial" and judged below. Verdict: False. For years, the FDIC has received questions from worried account holders who have heard that if their bank is seized, the FDIC can take up to 99 years to turn over insured deposit account funds.
In fact, there is no hard deadline, 99 years or otherwise. Instead, federal law requires the FDIC to make insured funds available to depositors "as soon as possible" after a seizure, and the FDIC typically does so by the next business day. Nor do they need to apply for deposit insurance when they open up a bank account at an FDIC-insured institution.
When a bank fails, the FDIC pays depositors by giving them an account at another insured bank in the amount equal to what they had at the failed bank, up to the insurance limits. Or, it simply issues the depositor a check. This usually happens the next business day or within a few days.
In some cases, the FDIC has to review an account to determine how much is covered before it reimburses the account holder. It can take a few years to recover deposits that exceed the insurance limit. Funds that exceed insurance limits are repaid on a cents-on-the-dollar basis. How We Make Money. Matthew Goldberg. Written by. Matthew Goldberg is a consumer banking reporter at Bankrate.
Matthew has been in financial services for more than a decade, in banking and insurance. Edited By Mary Wisniewski. Edited by. Mary Wisniewski. Mary Wisniewski is a banking editor for Bankrate. She oversees editorial coverage of savings and mobile banking articles as well as personal finance courses. Reviewed By Robert R. Reviewed by. Robert R. Johnson, Ph.
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