Home | Business
Depositors have options to make sure their money is insured
By David Bauerlein, The Times-Union
Jul 20, 2008
The recent collapse of California-based IndyMac left some customers holding the bag because their deposits exceeded the amount covered by the Federal Deposit Insurance Corp.
That experience can serve as a reminder to customers of other banks and credit unions to understand where the line is drawn on insuring their deposits.
FDIC coverage of $100,000 per depositor is more than enough for most bank customers. The National Credit Union Share Insurance Fund provides the same protection for credit union members' deposits.
Customers with more money at stake can divvy their money among more than one financial institution, gaining the $100,000 coverage at each one.
But it's also possible to boost the insurance coverage beyond $100,000 at a bank or credit union by setting up accounts with different ownership categories.
"It depends a lot on how they structure their accounts and set them up," said Terry West, president and chief executive officer of VyStar Credit Union.
A husband and wife could set up a $200,000 joint account and each would get $100,000 of deposit insurance coverage from that ownership category. The husband could also create an individual account with another $100,000 in insured deposits, and the wife could do the same in just her name.
Insurance for retirement accounts like IRAs is $250,000 per depositor at a financial institution.
Another option for boosting insurance coverage is a national program called CDARS - the Certificate of Deposit Account Registry Service - that lets a depositor get FDIC coverage on up to $50 million. CDARS takes the deposit and breaks it up into smaller amounts with less than $100,000 placed at other banks in the network. The customer only has to sign an agreement with one bank and gets one statement.
Founded in 2004 by the Promontory Interfinancial Network, CDARS counts BB&T, Bank of St. Augustine, Everbank and First Bank of Jacksonville among its participants.
West said VyStar has gotten a few more calls than usual this past week from members in wake of IndyMac's troubles, but it hasn't been a rash of queries. He said VyStar sits down with members to explain the insurance coverage. He added that the best safeguard for someone's savings is an institution's financial strength, which VyStar stands behind by sharing financial information with members about the credit union's conservative approach.
John Hall, spokesman for the American Bankers Association, said compared to the savings and loan crisis of the 1980s, financial institutions are well-capitalized with reserves to absorb losses from a weaker economy. The FDIC has been keeping tabs on 90 "problem institutions" this year, compared with almost 1,500 in that category in 1990, according to a report by the agency.
david.bauerlein@jacksonville.com, (904) 359-4581
Copyright 2008
Powered By Zebra Mobile