Savannah Holley works at the drive-through bank counter at Mount McKinley Bank in Fairbanks, Alaska. Tina Russell / The Penny Hoarder
The corona virus pandemic has triggered massive unemployment and shaken the world financial system.
With all this uncertainty, one may wonder whether it is safe to deposit your money in the bank or whether you should consider the old strategy of having the coffee pot buried in the back yard full of cash.
The short answer is yes, your money is safe. There is little reason to believe that banks will fail during the coronavirus pandemic. But even if your bank gets into trouble, your money is covered by a deposit guarantee from Federal Deposit Insurance Corp. protected.
What is the FDIC?
The FDIC is a federal agency whose primary role is to protect depositors' money from bank failures or fraudulent activities. The FDIC was founded in 1933 after many banks failed during the Great Depression.
Each depositor is insured up to $ 250,000 and accounts with different legal properties are insured separately. If you have savings accounts with three different banks, you are insured up to $ 250,000 in each bank. Or if you have a savings account and a shared checking account with a single bank, these are covered separately up to $ 250,000. The FDIC website proudly proclaims (several times) that "since 1933 no depositor has ever lost a penny of FDIC-insured funds".
The FDIC includes basic check and savings accounts, CDs, money market accounts, IRAs, trust accounts and employee benefit plans. The deposit guarantee does not cover life insurance and investments such as stocks, bonds, investment funds and pensions.
How does the FDIC work?
Like any other insurance company, the FDIC is financed from the insurance premiums paid to it by member banks to protect them from bank runs. Bank runs take place when customers become nervous about a bank's solvency and take their money out. If the situation is snowballs, banks can ultimately run out of money and fail what the economy entails.
When the worst-case scenario occurs and a bank goes under, the FDIC intervenes to reimburse customers for their deposits. The FDIC does not have to warn you about a bank closure, but publishes information at 877-ASKFDIC or at www.fdic.gov.
Beware of email phishing scams
Email phishing is in full swing as people are distracted and worried about their finances. Fraudsters send emails claiming to be the bank or even the FDIC itself, asking you to verify some information. It's just a trick to convince you to give out your bank passwords or account numbers.
The FDIC has published this warning on its website:
In these unprecedented times, consumers may receive incorrect information about the security of their deposits or their ability to access cash. The FDIC does not send unsolicited correspondence asking for money or sensitive personal information. The agency will never contact people who ask for personal information such as bank account information, credit and debit card numbers, social security numbers, or passwords.
Consumers can also be contacted by people who claim to be employed by an agency, bank, or other institution. These scams can involve a variety of communication channels, including email, phone calls, letters, text messages, faxes, and social media. Fraudsters can also ask for personal information such as bank account numbers, social security numbers, dates of birth and other details that can be used to commit fraud or to sell a person's identity. Consumers should not provide this information.
If you have any doubts about the validity of an email, do not click on links or attachments.
Tips for the security of your deposits
In a time of economic uncertainty, there are a few things you can do to keep your money safe.
Only open accounts with FDIC-insured banks. You can usually find the FDIC logo on the till window, on the front door or on the bank's website.
If you have to deposit more than $ 250,000, distribute the fortune. Divide the amount into smaller pieces and spread them across different banks or accounts to cover the entire amount.
Be smart about digital banking. Protect your account with a complex password and change it regularly. Only conduct banking transactions via a secure internet connection.
Tyler Omoth is a freelance writer who deals with topics such as personal finance, career counseling, and even lawn care. His work has been featured on TopResume.com, Writersweekly.com and others. He is also the author of over 70 children's textbooks and a proud parent of twin toddlers.
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