Photo: Marc Royce
Q: You speak highly of FDIC-insured bank accounts, but I've read that the FDIC is very underfunded. At this stage, when the government is bailing out every nitwit in the money line, I worry that its ability to cover FDIC-insured deposits will be gone. When I graduated from college and got my first credit card, my grandfather—who in 1929 pulled his money out of the bank the day before it failed—told me that the card shouldn't come out of my left pocket unless I had the cash to pay the bill in my right pocket. I followed his advice, and now I'm frustrated that my finances will be sucked down the drain by people who thought they deserved a 5,000-square-foot house, a Cadillac Escalade, and a 52-inch flat-screen TV. If my bank goes under, how can I trust that the government will have enough money left to reimburse my losses?
A: Given what is going on in our financial markets, and the enormity of the federal bailout programs, I absolutely understand your concern. I am not one to offer guarantees lightly, especially now, with our economy and the global credit markets in such a mess. But here is one Suze Orman guarantee you can take to the bank: If your money is in an FDIC-insured bank or a credit union backed by the National Credit Union Administration (NCUA) and you do not exceed the deposit limits for full insurance, then you have absolutely nothing to worry about. (To confirm whether your bank or credit union is insured, check your latest statement or go online and look for the FDIC or NCUA insurance logos. I also encourage bank customers to go to MyFDICInsurance.gov and credit union members to NCUA.gov; use the online tools to find out whether your accounts are fully insured.)
In the event your bank or credit union falls into trouble, you will receive every penny you have on deposit (as long as it's within the limit; read on for more about that). Don't worry about how well, or how poorly, the FDIC and NCUA are funded. All you need to focus on is the fact that the promise of FDIC and NCUA insurance is a pillar of our financial system; it is backed by the full faith and credit of our government. In the event either insurance fund runs dry, Congress will ensure that the United States Treasury has additional funds to make good on its insurance pledge. To renege on that promise would set off a global panic like nothing we have seen. That is not going to happen.
That said, I want to make sure you understand the limits of FDIC and NCUA insurance. For 2009, the limit has been raised from $100,000 to $250,000, so if the combined value of all your deposits in one bank is below $250,000, you have nothing to worry about. Still, don't forget that the $250,000 limit is valid only until the end of 2009. It may be extended, but until we know for sure, it's smartest to keep no more than $100,000 in your name at any one bank. That way you'll know your money is safe, not just for 2009 but for years to come.