A FDIC compensation system has been in place for some time to protect people's money, but it did not prevent savers worrying and queuing to withdraw their cash from banks around the country as the banking crisis magnified several years ago.
Since then, the US's compensation scheme for savers in bust banks, the Financial Deposit Insurance Corporation, has been strengthened several times.
And as of 31 December 2010 it now offers full compensation up to 250,000. Per saver, per authorized institution.
Who is covered?
The new higher limit offers compensation to anyone who has money in an American FDIC insured banks, saving and loans, community saving or credit union.
On the assumption that the insolvency stopped you getting your money out in the normal manner, you would be invited to apply to the FDIC for compensation.
What is an authorized institution?
Any savings institutions should be formally authorized by the FDIC to hold your money. If it is not, it is operating fraudulently. Look for the logo displayed in the branch and online.
How quickly would I get my money?
The plan now is that most depositors will receive their compensation within seven days and the remainder of them within 20 days. In most cases the FDIC arranges for another institution to take over the deposit accounts and there is no delay and no change to the depositor.
We have got a joint account, so how much is protected for us?
As before, holders of joint accounts are both eligible for compensation in their own right. So, a payment of up to 500,000 may be made in relation to a joint account.
What if I owe the bank some money - for instance a mortgage?
Your debt to the bank will still exist and you will still have to repay it - the loan will not evaporate just because your lender has gone bust. And you should continue to make your payments as before, if any changes are made you will be notified. Do not delay your payments as this will affect your credit scores
Any money owed to you by the bank, e.g. in a savings account, will be paid in its totality - up to the new limit.
Previously it would have been offset by any sum you owed to the savings institution.
What happens if I have money in different accounts, with the same bank?
Firstly, there is only one chunk of compensation per saver, per authorized institution.
So if you have two or more accounts with one bank your compensation limit will not be greater than for someone with just one account.
To make sure as a bank representative and they will also provide you a brochure. You can also go to the FDIC online site for simple explanations and to verify that your bank is insured and also to verify if it associated with any other bank under a different name, where you might also have funds.
Be a smart consumer, ask questions.
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Barry Norman is a contributor to and blogger at firstcredit.net. For over ten years FirstCredit.net has provided consumers free information helping them make sense of credit cards and the financial industry. Whether you are a longtime cardholder or considering online banking, FirstCredit.net can help you make informed decisions regarding your savings.
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