What happens to my FDIC insurance if my bank merges?

Question: I have a $100,000 CD with Crown Bank and another $100,000 CD with Fifth Third. I have since been informed that Fifth Third Bank has bought out Crown Bank. Will I still have FDIC coverage on my Crown CD even though it puts me over the limit?

Answer: Yes. Your Crown Bank CD will continue to be insured separately until it reaches maturity. That's how it works when two insured banks merge. For other types of accounts (such as checking, savings, money market), there is a six-month grace period during which separate FDIC insurance continues. You can even extend coverage if a CD comes due during the grace period and you renew it for the same term. For details, check page 29 of Your Insured Deposit.

If you have other questions about FDIC insurance, call 877-275-3342 toll-free.

Comments

[myra sheer]

Is countrywide going bankrupt

[Jonathan Roy]

FDIC insurance does indeed protect your investments, Lou lied about having it. Not sure how that makes it fake...

I believe FDIC insurance does cover your interest as well as principal, but only up to the $100K limit. So if you have a $87K CD that should be fine. It's when you get a $100K CD that the interest is over the cap.

If you have a significant amount of money to invest safely, find a local community bank that belongs to the CDARS network. Then you can get FDIC insurance on up to $50M without the hassle of placing money at 500 separate banks by yourself. (It started out smaller, then up to $15M, and now up to $50M. Quite cool.)

More information at www.cdars.com.

[Helen Huntley]

Both the principal and the interest earned are covered by FDIC insurance up to the insurance limits. If this is a joint account, you have up to $200,000 of coverage. When you cash a CD early, you face an early withdrawal penalty of some months of interest. Exactly how much the penalty is varies. Check the terms of your CD.

My husband and I are both over 65. We recently put $87,000. into a CD at Countrywide Bank. With all the problems that we have read about with this bank, we have questions. It is our understanding that the FDIC covers the amount of the CD but is not responsible for the interest if Countrywide goes under. If we withdraw the money what kind of penalty would we be obliged to pay, just the interest gained or do they take some of the principal and what percentage?

[Helen Huntley]

Theoretically there could be a delay in getting access to your savings. However, that is extremely unlikely in this case. Countrywide would end up being acquired by another institution, which would assume liability at least for the insured deposits and most likely for all deposits. Bank of America already has invested $2-billion in Countrywide and has the right to match any other offers for the company.

We have a good portion of our retirement with Countrywide Bank. If they go bankrupt (not likely) what is the procedure and how long does it take for the FDIC to return depositors savings?

FDIC is a prayer if large numbers of banks were to fail. It is a nice marketing took however. In this digital magnetic strip age we are in, with paper being the primary currency of exchange, how can anyone feel their "cash" is safe? FDIC is in fact SUCH a great marketing tool, Lou Pearlman used it to perfection until he got stupid and greedy.