Your money is safe in the bank — even if it goes under

The economic crisis has people worrying about whether their money is safe in the bank. Here’s how to make sure it is.

There are plenty of things to worry about right now — but whether your money is safe in the bank likely shouldn’t be one of them.

The coronavirus crisis has sent the economy into a tailspin and left many people with a lot of questions about what to do with their finances. It appears some Americans are hoarding cash at levels they did around Y2K. But before you start stuffing stacks of bills under your mattress, take a breather: As long as you’ve got your money parked with a government-insured bank, you should be fine. The Federal Deposit Insurance Corporation (FDIC) insures all bank deposits of up to $250,000.

“I want to underscore that our banks are safe,” FDIC Chair Jelena McWilliams said in a statement in late March. “Your FDIC-insured deposits are safe.”

Despite this assurance, people appeared to be pulling large quantities of cash out of banks early on in the coronavirus crisis, according to data from the St. Louis Fed. And Paul Benda, senior vice president at the American Bankers Association, said that, anecdotally, banks across the country reported some of their consumers coming in to withdraw large sums of cash.

Benda said that the sudden outflow of withdrawals has leveled off, though he expects them to go back up again now as people get their stimulus checks from the federal government. “The system’s got a lot of extra capacity if another spike did occur,” he said.

However, he cautioned that people’s stimulus money is likely safer in the bank: “Once that money leaves the bank … there’s no insurance on that. You can be robbed,” he said. “It’s much harder to rob a bank than a person.”

A large part of the reason for that is the FDIC, which was founded in 1933, after the Wall Street crash of 1929 and onset of the Great Depression saw thousands of banks fail. Since the agency was launched, no depositor has lost a cent of funds the FDIC insures.

The bank is a safe place for your money, even if it fails

The 2008 economic crisis started in the financial sector and percolated into the rest of the economy. This time, things are moving in reverse — the crisis is starting in the wider economy, with businesses closing and millions of Americans losing their jobs, and trickling up to the financial sector.

The government is taking steps to make sure banks have the funds they need right now, and the banks are better capitalized now than they were last time around, which basically means they are better equipped financially to weather the storm. Banks are also being encouraged to use the Federal Reserve’s “discount window” for taking out loans if they need them so that they can continue to lend to people and businesses. Last month, the Fed said the largest financial firms have $1.3 trillion in common equity and $2.9 trillion in high-quality liquid assets. Basically, this was a reassurance that the banks are okay, that they have access to a lot of cash if they need it, and that if things get much worse, the central bank is there to help them.

Still, banks, like most sectors, are feeling some pain right now. But even if your bank fails, your money isn’t out the door with it, assuming it’s backed by the FDIC.

“If for any reason your bank were to fail, the government takes it over (banks do not go into bankruptcy). This is usually done on a Friday night and by Monday morning your local branch is operating again, often like nothing happened from the depositor’s point of view,” explained Aaron Klein, the policy director at the Center on Regulation and Markets at the Brookings Institution, in an email. “Generally the FDIC tries to first find another bank to buy the failed bank (or at least its accounts) and your money automatically moves to the other bank (just like if they’d merged). If not, the FDIC operates your old bank under a new name until they can find another bank to acquire the accounts.”

For example, the FDIC closed the First State Bank of Barboursville, a small bank in West Virginia, at the beginning of April. Its deposits were acquired by MVB Bank, and its branches will reopen under that bank as well. So those who previously banked with First State Bank are now with MVB.

The FDIC has a full fact sheet on its role when a bank fails.

What you can do to keep your money safe

One proactive step you can take is to make sure your bank is indeed insured by the FDIC. To do that, you can use FDIC’s bank lookup tool, call the agency, or just go to the bank’s website to see if the FDIC’s logo is there. If you bank with a credit union, you’d want to make sure it is insured by the National Credit Union Administration (NCUA), which also protects deposits of up to $250,000. The NCUA logo should be on its website.

“If your money is at a bank or credit union, it is automatically insured up to $250,000,” Klein said. “If your money is at a non-bank (including a pure stock brokerage), that’s a different story.”

In those cases, you may want to think about your options and talk to whoever you have your money with to make decisions.

It’s also important to look out for scams, including ones that are banking-related. In March, the FDIC issued a warning of scammers pretending to represent the agency to commit fraud and scare people into giving up their information:

During these unprecedented times consumers may receive false information regarding the security of their deposits or their ability to access cash. The FDIC does not send unsolicited correspondence asking for money or sensitive personal information. The agency will never contact people asking for personal details, such as bank account information, credit and debit card numbers, Social Security numbers, or passwords.

Consumers may also be contacted by persons who claim to be employed by an agency, bank, or another entity. These scams may involve a variety of communication channels, including emails, phone calls, letters, text messages, faxes, and social media. Scammers might also ask for personal information such as bank account numbers, Social Security numbers, dates of birth, and other details that can be used to commit fraud or sell a person’s identity. Consumers should not provide this information.

If you have more questions on coronavirus and its effect on the economy, we have more answers here, with 11 questions about the coronavirus economic crisis you may have been too embarrassed to ask.

Support Vox’s explanatory journalism

Every day at Vox, we aim to answer your most important questions and provide you, and our audience around the world, with information that has the power to save lives. Our mission has never been more vital than it is in this moment: to empower you through understanding. Vox’s work is reaching more people than ever, but our distinctive brand of explanatory journalism takes resources — particularly during a pandemic and an economic downturn. Your financial contribution will not constitute a donation, but it will enable our staff to continue to offer free articles, videos, and podcasts at the quality and volume that this moment requires. Please consider making a contribution to Vox today.