Is My Money Safe in the Bank? - NerdWallet (2024)

In times of economic unease — such as during a pandemic, when bank failures are trending or there’s talk of a possible recession — you may find yourself wondering whether your money is safe in your bank account.

The fact is that your money is protected in a bank — there’s no need to withdraw it for security reasons. Here's more about bank safety and why it shouldn’t be a concern, thanks to the system that insures your deposits.

» Get more from your savings: See our picks for the best high-yield online savings accounts

Your money is safe in a bank with FDIC insurance

A bank account is typically the safest place for your cash, since banks can be insured by the Federal Deposit Insurance Corp. up to $250,000 per depositor, per insured institution, per ownership category. Banks that are insured by the FDIC often say “Member FDIC” on their websites.

If you bank with a different kind of institution, such as a neobank or a financial technology company that’s not an FDIC member itself, you can check to see if it partners with an FDIC-insured bank. If it does, it means your accounts are covered by federal insurance through the financial institution’s partner bank. These institutions often note “funds insured by FDIC” instead of “Member FDIC.”

Similarly, your money is safe at a credit union with National Credit Union Administration insurance. Like FDIC insurance, NCUA insurance covers $250,000 per owner, per insured credit union, per ownership category.

In the event of a bank run or other bank failure, your money (within the stated limit) is protected and guaranteed to you. If you have more than $250,000 to deposit, you can open accounts at multiple banks or open accounts in different ownership categories (such as a single account and a joint account) and distribute your funds across each.

» Learn more: How to insure your money when you’re banking over $250K

⏰ Limited-time offer

AD

Don’t miss out on a bigger bonus

Get a NerdWallet-exclusive bonus of up to $400 when you open an account and hit $5,000 in direct deposits within 25 days after your first one. That’s $100 more than SoFi’s normal $300 bonus! Select "Learn More" to get started. Expires 4/22/24. Terms apply.

Is my money safe in the bank right now?

With the events that have happened in the past few years — a global pandemic, the failures of multiple banks and several interest rate changes by the Federal Reserve, to name a few — you might question whether banks are truly a secure place to keep your funds. The answer is that yes, your money is safe in the bank. As long as your deposit accounts are at banks or credit unions that are federally insured and your balances are within the insurance limits, your money is safe.

Banks are a reliable place to keep your money protected from theft, loss and natural disasters. Cash is usually safer in a bank than it is outside of a bank. For instance, there’s no guarantee that funds kept in your home are safe from burglars or fires.

How does a bank fail?

A bank failure happens when a bank can’t fulfill its obligations to depositors. For example, if a large number of customers believe that their bank is going to run out of cash, they can decide to withdraw their cash at the same time. This is what's called a bank run. Bank runs can be dangerous, self-fulfilling prophecies because these withdrawals happen so quickly that they deplete a bank's cash reserves while the bank’s remaining assets might be nonliquid and not immediately available to convert into cash.

Is My Money Safe in the Bank? - NerdWallet (4)

» LEARN: Find out what to do when bank-run panic is trending

What happens when a bank fails?

On the rare occasion when a bank fails, the bank is closed by a state or federal regulatory agency. That agency attempts to sell the failed bank to a healthy bank so customers can carry on with their accounts as usual. If that option doesn’t work out, the FDIC will pay customers by check for their deposits (up to the FDIC limits) within a few days after the bank is closed.

» Ask a Nerd: How Does SVB’s Closure Affect Me?

Is my bank going to collapse?

Although bank failures were a big topic in the news after the failures of Silicon Valley Bank, Signature Bank and First Republic Bank in early 2023, it’s unlikely that your bank will also fail. The situations that these banks found themselves in were highly unusual. (Read more about why these banks failed, and why your bank probably won’t.) For context, there are more than 4,700 FDIC-insured banks and more than 4,750 NCUA-insured credit unions that remain solvent.

Bank failures in general aren’t common. Since 2000, just a fraction of existing banks have failed: 566, to be exact. For context, 489 of those banks failed as part of the 2008-2009 financial crisis. Before the failures of SVB, Signature Bank and First Republic Bank in 2023, there hadn’t been a bank failure since that of Almena State Bank in October 2020.

» Your questions answered: All about the banking crisis of 2023

Should I take my money out of the bank?

You should only take your money out of the bank if you need the cash. In the bank, cash is less vulnerable to theft, loss and disaster. And depending on the bank account, you could be earning interest on your cash that you won’t be earning if it stays under your mattress.

For example, if you keep $5,000 in the bank for a year in a high-yield savings account that earns 4% APY, you'll earn about $200 — compared to the $0 you'd earn by keeping your cash at home.

» Learn more: How to calculate interest in a savings account

How to avoid bank fraud

While it’s true that your money is safe in the bank, you should still be aware of and know how to avoid banking scams and bank fraud. There are actions you can take and good habits you can follow to help protect your money.

A few general rules for avoiding banking scams are:

  • Don’t share passwords or personal information with people who contact you claiming to be from your bank, utility company or mobile service provider, for example. Instead, call the bank or company yourself to confirm whether they need information from you and provide it then.

  • Don’t click on links in emails or texts claiming to be from your financial institution.Instead, log in to your account or call your bank’s official phone number.

  • Never make a financial transaction when you’re being pressured or rushed by an unfamiliar source (whether that’s someone you don’t know or someone whose identity you can’t confirm).

Other steps you can take to boost online banking safety include setting up email and text alerts for account activity and using password managers and multifactor authentication for logging in to your accounts.

» Learn more: How to boost your online banking safety

Changing financial trends and current events may make you feel uncertain about your money at times, but there are systems in place to keep the funds in your bank account protected and your money management running smoothly.

Is My Money Safe in the Bank? - NerdWallet (2024)

FAQs

Is My Money Safe in the Bank? - NerdWallet? ›

Savings accounts at banks are federally insured by the Federal Deposit Insurance Corp. (and by the National Credit Union Administration for credit union accounts), up to $250,000 per depositor, for each ownership category (such as joint accounts and single accounts), per insured institution.

Is my money 100% safe in a bank? ›

As long as your deposit accounts are at banks or credit unions that are federally insured and your balances are within the insurance limits, your money is safe. Banks are a reliable place to keep your money protected from theft, loss and natural disasters.

Is it safe to have all your money in the bank? ›

Most deposits in banks are insured dollar-for-dollar by the Federal Deposit Insurance Corp. This insurance covers your principal and any interest you're owed through the date of your bank's default up to $250,000 in combined total balances. You don't have to apply for FDIC insurance.

Is it safe to link my bank account to NerdWallet? ›

We link your accounts using the Plaid platform, who are just as committed to your security as we are. Learn more about Plaid privacy policies. How does NerdWallet protect my personal information? We use industry-standard security controls, such as cryptography, to protect your personally identifying information.

How safe is money in a bank account? ›

All banks and building societies authorised by the Prudential Regulation Authority are covered by the Financial Services Compensation Scheme (FSCS). It's an independent service that protects your money if your financial service provider goes bust.

Can banks seize your money if economy fails? ›

Banking regulation has changed over the last 100 years to provide more protection to consumers. You can keep money in a bank account during a recession and it will be safe through FDIC and NCUA deposit insurance. Up to $250,000 is secure in individual bank accounts and $500,000 is safe in joint bank accounts.

Can the government take money from your bank account in a crisis? ›

The government can seize money from your checking account only in specific circ*mstances and with due process. The most common reason for the government to seize funds from your account is to collect unpaid taxes, such as federal taxes, state taxes, or child support payments.

Where do millionaires keep their money? ›

Cash equivalents are financial instruments that are almost as liquid as cash and are popular investments for millionaires. Examples of cash equivalents are money market mutual funds, certificates of deposit, commercial paper and Treasury bills. Some millionaires keep their cash in Treasury bills.

Where do billionaires keep their money? ›

Common types of securities include bonds, stocks and funds (mutual and exchange-traded). Funds and stocks are the bread-and-butter of investment portfolios. Billionaires use these investments to ensure their money grows steadily.

What bank do most millionaires use? ›

The Most Popular Banks for Millionaires
  1. JP Morgan Private Bank. “J.P. Morgan Private Bank is known for its investment services, which makes them a great option for those with millionaire status,” Kullberg said. ...
  2. Bank of America Private Bank. ...
  3. Citi Private Bank. ...
  4. Chase Private Client.
Jan 29, 2024

Can I trust NerdWallet with my info? ›

At NerdWallet, we take your security seriously.

We take our responsibility to protect your confidential information seriously, and use 128-bit encryption to protect your data.

Does NerdWallet sell your info? ›

We may share information collected directly from you with unaffiliated third-party partners in connection with your use of specific aspects of the Services. Some examples include but are not limited to: When you request to prequalify for a third-party loan or credit card product on NerdWallet Services and.

Is NerdWallet really free? ›

NerdWallet is entirely free for our account holders. So how do we make money? Our partners compensate us.

What happens if my bank goes bust? ›

When a bank is at risk of going bust, there is usually a run on the bank when the bank's customers try to withdraw the money in their accounts before the bank closes. There is a government scheme in place which will compensate account holders of a bank that has failed, but only up to a limited sum.

What happens if a bank collapses? ›

When banks fail, the most common outcome is that another bank takes over the assets and your accounts are simply transferred over. If not, the FDIC will pay you out. Funds beyond the protected amount may still be reimbursed, but the FDIC does not guarantee this.

How can I protect my money from a bank collapse? ›

Ensure Your Bank Is Insured

If a bank or credit union collapses, each depositor is covered for up to $250,000. If your bank or credit union isn't FDIC- or NCUA-insured, however, you won't have that guarantee, so make sure your funds are at an institution covered by deposit insurance.

How much money is too much to keep in one bank? ›

How much is too much savings? Keeping too much of your money in savings could mean missing out on the chance to earn higher returns elsewhere. It's also important to keep FDIC limits in mind. Anything over $250,000 in savings may not be protected in the rare event that your bank fails.

Why should you keep $100 dollars in your checking account? ›

Keeping a minimum amount of money in checking at all times is wise because it can help you to avoid banking fees. The fewer fees you pay to the bank, the money you get to keep. Banks charge a variety of fees for checking accounts, including monthly maintenance fees and overdraft fees.

Is it good to have $100,000 in the bank? ›

For many people, financial stability means being confident in your ability to pay for all the expenses in your life — whether expected or not. There's no one-size-fits-all number in your bank or investment account that means you've achieved this stability, but $100,000 is a good amount to aim for.

Where is the safest place to keep a large sum of money? ›

It's important to have a savings account with a bank that's insured by the Federal Deposit Insurance Corp. (FDIC). This way, you won't lose your funds should the bank fail. The FDIC insures up to $250,000 per depositor, per FDIC-insured bank, per ownership category.

References

Top Articles
Latest Posts
Article information

Author: Reed Wilderman

Last Updated:

Views: 5823

Rating: 4.1 / 5 (52 voted)

Reviews: 91% of readers found this page helpful

Author information

Name: Reed Wilderman

Birthday: 1992-06-14

Address: 998 Estell Village, Lake Oscarberg, SD 48713-6877

Phone: +21813267449721

Job: Technology Engineer

Hobby: Swimming, Do it yourself, Beekeeping, Lapidary, Cosplaying, Hiking, Graffiti

Introduction: My name is Reed Wilderman, I am a faithful, bright, lucky, adventurous, lively, rich, vast person who loves writing and wants to share my knowledge and understanding with you.