Personal Resource Center

How Does FDIC Insurance Work?

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FDIC insurance doesn't cover money stored in digital payment apps, such as PayPal, Venmo, or Cash App.

On the other hand, say you have $50,000 in a checking account with Bank A, $250,000 in a savings account with Bank B, and $100,000 in a CD with Bank C. Assuming all three banks are FDIC insured, you would be fully covered because the FDIC limit applies separately to each bank.

Joint Account

You have a joint checking account with your spouse with a balance of $300,000. Your entire balance is covered by FDIC insurance because each owner has up to $250,000 of FDIC insurance coverage.

Mix of Ownership Categories

You have $250,000 worth of CDs at a bank in an account that you own individually. At the same bank, you have a joint checking account with your spouse with a balance of $500,000. Your spouse has no other accounts with the bank.

All of your assets would be covered because you have $250,000 of coverage for the CDs you own individually and you and your spouse each have $250,000 of coverage for the joint account.

However, say you and your spouse co-own CDs worth $500,000 and have a checking account with $50,000 in it at the same bank. Because the two accounts fall under the same ownership category (joint accounts), you each have $250,000 of coverage. So $50,000 of your jointly-held assets would be uninsured if the bank went under.

How does FDIC Insurance Work?

FDIC insurance works by reimbursing customers for the balance in their covered accounts — up to the limit — when a bank fails. Unlike other types of insurance, you don't need to apply to the FDIC for coverage or pay a premium. Instead, FDIC-insured banks pay a fee to participate in the program, and coverage is automatic when you open an eligible account.3

When a bank fails, it's closed by a federal or state banking regulatory agency because it doesn't have the financial resources to meet its obligations.

When that happens, the FDIC reimburses the bank's customers up to the maximum amount so they don't lose all their money. Historically, the FDIC pays the bank's customers within a few days of the bank closing.4 That payment can come via a deposit into a new account at another FDIC-insured bank or a check. You do not need to request the funds or fill out any paperwork. The reimbursement happens automatically.

In some cases, another financial institution will purchase a failing bank. In that case, FDIC insurance doesn't pay customers. Instead, the buyer is responsible for ensuring their new accounts remain FDIC-insured.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

  1. CFPB, “CFPB Finds that Billions of Dollars Stored on Popular Payment Apps May Lack Federal Insurance," published June 1, 2023, accessed July 12, 2023.

  2. FDIC, “Deposit Insurance At a Glance," accessed July 12, 2023.

  3. FDIC, "Your Insured Deposits," updated June 22, 2023, accessed July 17, 2023.

  4. FDIC, “Deposit Insurance FAQs," updated March 20, 2023, accessed July 12, 2023.