CD Rates Safe in Light of FDIC Losses

The FDIC's insurance fund has fallen from $45 billion to $10 billion in just the course of 1 year. The FDIC currently has 416 banks on its troubled banks list and has already closed 81 banks so far this year.

The FDIC estimates that the failure of BankUnited would cost them $5 billion, half of the funds they currently have.

With the FDIC funds at such low levels, there's no concern over funds not staying insured however. If worst comes to worst the FDIC will impose greater fees on banks in order to get more capital, this in turn might cause banks to lower their CD rates. All FDIC insured funds will stay insured however.

After a FDIC takeover of a bank, accounts are usually still able to be accessed. It's rare that the FDIC can't find another bank to take over the accounts of a failed bank. It's usually a pretty painless transaction. The only thing people should worry about is staying under the $250,000 FDIC insured limit, the limit that congress extended until 2013.

If you have more than the insured limit, there's no guarantee you'll get your money back if the bank fails.

There are ways to get more coverage. If you have a joint account its insured for up to $500,000 since it's insurance for 2 individuals. You can also utilize multiple accounts like certificates of deposit, checking, and savings.

When opening accounts you should always try to get the best yield on your money. Shop around and looks at the CD rates and savings rates banks have to offer. It pays in the long run to find a high yielding account.

Michael Jameiosn contributes to Bromoney's CD Rates and specializes in long term CD rates.

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