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When you deposit your funds into a bank, you trust your money will be safe and available when you need it. The cash you need to pay your bills today and the funds you save for tomorrow are the result of your hard work and necessary for survival. Your relationship with your bank is built on trust.
During the late 19th and early 20th centuries, especially between 1929 and 1933, this trust was broken because many banks were unable to return cash to depositors, causing widespread panic and a loss of confidence in America’s financial institutions.
To alleviate this loss of trust, the United States government created an entity known as the Federal Depositors Insurance Corporation (FDIC) to ensure that deposits would be available to customers. If you’ve ever seen “Member FDIC” at your local bank or heard the phrase in a commercial and wondered, “What does Member FDIC mean?” read on to learn more.
A Brief History: What Does Member FDIC Mean?
To understand why the FDIC exists and its importance to your banking practices, let’s briefly examine the history of deposit loans and how they work.
While the FDIC has insured depositor funds for more than 90 years, deposit insurance can be traced back to the 1820s, when state insurance programs offered insurance on funds deposited in state banks. As state-chartered banks transitioned to national banks, state insurance programs slowly disappeared and would not become prominent until the 1930s.
The 1929 stock market crash and the ensuing Great Depression led to panic withdrawals of money that banks did not have on hand, which led to the failure of thousands of banks. The Banking Act of 1933 was signed and enacted in 1934 in direct response to almost 10,000 banks suspending operations between 1929 and 1933. As part of the Banking Act of 1933, the government created the FDIC to ensure that customers would be able to recoup money they deposited with the bank even if the bank failed.
Today, while bank failure is at a significantly lower rate than it was in the lead-up to the FDIC’s creation, the FDIC continues to insure deposits to protect consumers from being unable to access their vital funds. Since its creation in 1934, the FDIC has not lost a penny of insured funds due to bank failure.
Let’s take a closer look at what it means for a bank to be a Member of the FDIC and what types of deposits are and are not covered.
What Does Member FDIC Mean for Banks?
To have the Member FDIC status, a bank must insure deposits with the FDIC. FDIC-insured bank accounts guarantee that depositors are covered for at least $250,000 per depositor per FDIC-insured bank.
Some of the traditional deposit accounts that are covered include:
- Checking accounts
- Savings accounts
- Money market deposit accounts
- Certificates of Deposit
- Certain retirement accounts
Some of the most prominent account types and financial products that the FDIC doesn’t normally cover are:
- Mutual funds
- Annuities
- Life insurance policies
- Stocks and bonds
- Crypto assets
- Municipal securities
- Safe deposit box contents
The important thing to remember is that when you bank with a financial institution that is an FDIC member, you can trust that your deposits will be accessible whenever you need them.
Are All Banks Required to Be FDIC Insured?
While the majority of banks are FDIC-insured, banks are not required to be FDIC-insured. If you are curious about a bank’s status, look for an official FDIC sign, which is required to be on display in all FDIC-insured physical bank locations, ATMs, websites and any other point where money is deposited. You can also use the FDIC’s BankFind Suite to look up banks in your area.
Trusting Your Finances with a Bank That Cares
If you’re looking for a new bank, choose one that focuses on local individuals and businesses. Visit the Contact Us page to send us a message, or visit any of our locations and see how the team at Community Point Bank can help you make the most of your banking experience today.
