The FDIC & Your Money - What You Should Know

Ben Franklin and money. Sandy Spring Bank FDIC

In the 1920s and 30s, economic crisis and the feeling of mistrust and unease rode rampant, leading to a dramatic rise in bank failures. During those times, if a bank failed, that was it; there was no recourse for the depositor, they simply lost everything they had. The result was a near universal lack of trust in both the American financial system and banks in particular. Part of many efforts meant to reestablish that trust, in 1933 Congress passed legislation creating the Federal Deposit Insurance Corporation or FDIC. 

Simply stated, the mission of the FDIC is to maintain stability and public confidence in the nation's financial system. No easy feat in 1933, but thanks in large part to the FDIC that trust was indeed earned back from the public and persists to this day, making the American financial system the mark against which all others are measured. How does it do this?

The FDIC's main instrument is the insurance of bank deposits. FDIC deposit insurance enables consumers to confidently place their money in thousands of FDIC-insured banks around the country - backed by the full faith and credit of the U.S. Government. This coverage depends on two things: whether your financial product is a deposit and whether your bank is FDIC-insured. 

The FDIC covers

  • Checking accounts
  • Negotiable Order of Withdrawal (NOW) accounts
  • Savings accounts
  • Money Market Deposit Accounts (MMDAs)
  • Time deposits such as certificates of deposit (CDs)
  • Cashier's checks, money orders, and other official items issued by a bank. For a full list of what is and is not covered please refer to the FDIC website

As a consumer, you don’t need to apply for FDIC insurance. Coverage is automatic as long as you open a deposit account at a bank or financial institution that is FDIC-insured. Standard insurance is $250,000 per depositor, per insured bank, for each account ownership category. 

So what happens if the worst happens, your bank fails and you need FDIC insurance?

What we mean when we say bank failure is that a bank can no longer meet its obligations to depositors and others, and so the federal or state banking regulatory agency steps in to close it. FDIC insurance will then cover the balance of each depositor's account, dollar for dollar, up to the limit. 

Sandy Spring Bank has proudly been a member of the FDIC since 1934, which means your money is also protected by the insurance.  

To calculate your coverage across different types of accounts and banks use the FDIC EDIE calculator.

This publication does not constitute legal, accounting or other professional advice. Although it is intended to be accurate, neither the publisher nor any other party assumes liability for loss or damage due to reliance on this material.