For decades, you have probably t
rusted that when you put your money into your savings account that it was safe and secure. In the past few years, however, since bank after bank has failed, you may feel a little less secure about the money you put in the bank. While you may have heard about the FDIC and its insurance for the money a bank holds, until the last few years it has been years, if ever, when you have had to evoke your claim to it. Rest assured that each of your checking and savings accounts is insured for up to $250,000 each. This means that if your bank fails, you are covered for up to this amount.
What Happens When a Bank Fails
Assume that your bank fails today. You should know what to expect so that if and when the time comes you are prepared. You typically find out that your bank has failed in one of two ways – a letter in the mail or a sign on the bank door when you go to the branch. When a bank fails, the FDIC takes over the bank and immediately works to find another bank to buy the bank’s assets. For the most part, the transition is a seamless one for you as the bank customer. Generally, there is not an interruption in services or access to the money in your savings account or checking account. Your ATM card and checks remain in working order. If and when the new bank takes over, the new bank will slowly transition you into using its checks and ATM card. If, for some reason, there is an interruption of access to your money, it is typically only one or two days. According to the managing director for consulting firm for the banking industry, Kenneth Alverson from Novartis LLC, This can be disconcerting, but the FDIC keeps it to a minimum. The FDIC tries to keep interruptions to the weekend as the old bank closes up shop on Friday and the new bank opens for business as usual on.
Moving Forward
Eventually, the new bank will require you to order new checks with the new bank name and account information on it. The bank will also issue you a new ATM card. Typically, the transition takes place over time, and the new bank proactively contacts you to transition you over little by little until the transition is complete. If for some reason a new bank does not take over the assets of your old bank, the FDIC will notify you of this as well. You will have a set period of time to find a new bank and move over your funds from a checking or savings account.
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