Certificates of Deposit: Are CDs FDIC insured?

Certificates of deposit are often seen as a great option for those looking for a way to save money, however, before trusting their money to the bank, some wonder are CDs FDIC insured?

CDs are a savings product that accrues interest on a one-time deposit over a specified duration, and they are indeed protected by the FDIC.

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Are CDs FDIC insured?

When considering certificates of deposit, you should keep in mind that the Federal Deposit Insurance Corp. (FDIC) safeguards your funds in the unlikely event of your bank’s closure.

Certificates of Deposit (CDs) provide a secure method of saving money as they are protected by federal deposit insurance. The insurance is applied as it occurs with other types of bank accounts. In case the bank or credit union experiences a failure that puts at risk your funds, the FDIC will take action as your funds are guaranteed to be reimbursed.

In these particular cases, the FDIC offers full reimbursement of up to $250,000. 

For the insurance to take full action, the bank or credit union must be a member of a federal deposit insurance agency. Now, you must know not all the banks out there are actually engaged with federal agencies. However, this is a rare case, as the vast majority are indeed linked to these institutions.

How does FDIC insurance work?

As companies that offer CDs continue to emerge, the insurance of this savings product is divided between two different entities.

Thus, when it comes to banks, the insurance goes to the Federal Deposit Insurance Corp. (FDIC), and they become responsible for the funds held.

As per the insuring credit unions, it is the responsibility of the National Credit Union Administration (NCUA) to protect the funds. Under this insurance method consumers don’t have to enroll in the insurance program nor do they have to complete any payments, as the financial institutions cover the insurance cost on behalf of their customers.

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What happens if my bank collapses?

Although a bank collapse is not a very common occurrence, the recent fall of the Silicon Valley Bank has customers of other banks particularly worried. If this were to happen, the insurance would cover your funds as long as they do not surpass the limit of $250,000. 

When faced with the question “are CDs FDIC insured?” keep in mind that the Federal Deposit Insurance Corp. (FDIC) is obligated to reimburse your funds if under the established limit.

In previous cases, the authorities have made it mandatory for banks and federal insurance agencies to take responsibility over the customers’ funds. Whether the money was insured or not, the entities must guarantee their depositors will not lose their money.

For example, in light of the SVB’s collapse the Treasury, Federal Reserve, and the FDIC issued an official statement reassuring the protection of all depositors, even beyond the FDIC insurance limits.

Are CDs FDIC insured, with no exceptions? 

As stated previously almost every available financial institution relies on federal insurance. Yet, there are a few entities that are not FDIC insured. If you are unsure whether your bank is secured by the FDIC, you may check on your bank’s web site as this information should be displayed somewhere in their platform.

Once in your bank’s site, you may scroll down and look for the following acronyms: FDIC or NCUA.

If you are unable to find information in such a way, please use the FDIC’s BankFind tool or the NCUA’s Credit Union Locator widget.  

Are CDs a safe option?

For many, opting for a certificate of deposit seems like a risky idea. On the one hand, they require that the stipulated amount of money be kept for a certain period of time without the possibility of taking it out for use until the deadline is met. On the other hand, the constant changes in the financial market, put before the users options that had not been considered years ago. Hence the multiple purely digital companies that offer CDs currently. 

Virtual banks and other completely digital financial entities now offer more profitable options when compared to the profitability of conventional CDs. This new trend is causing users some uncertainty and confusion, as virtual banks are not nearly as well known as conventional financial firms. However, are CDs FDIC insured? Yes! Thus, they make for a safe money saving method.   

Accordingly, this is not an insecure method for saving money, nor should it be discarded as they provide a safe tool in the market. The funds are actually protected and the entities are responsible for ensuring the welfare of the depositors’ assets.

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