Are You Protected Having All Your Cash At One Bank?

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The quick answer? It depends on how much savings you have. 

On March 10, Silicon Valley Bank (SVB) collapsed on the heels of a bank run by its customers and a major investment loss. Once that happened, it immediately sent shock waves across the banking sector. And it left millions of Americans wondering whether their money was safe.

In light of what happened at SVB, you may be wondering if you’re okay to keep your money at a single bank, or whether you should spread your cash out across different banks. And the answer depends on how much money you have.

You want full FDIC protection

While SVB’s collapse was no doubt a major blow to its customers, the good news is that the bank itself was FDIC-insured. This means depositors were protected from losses on up to $250,000 in cash. In fact, you get that protection at any FDIC-insured institution. So if you’re worried about keeping all of your money at the same bank, you should know that as long as your total cash deposits don’t exceed $250,000, you’re fully protected from losses.

To be clear, that $250,000 limit is per depositor. Let’s say you have a savings account and a certificate of deposit (CD) at the same bank. If you have $200,000 in a savings account and $100,000 in a CD, it means you’re technically at risk of losing $50,000 if your bank goes under. So in that case, you’d potentially want to move $50,000 (or a little more, to give yourself a cushion as interest accrues) to another bank.

Another thing you should know is that if you have a joint bank account with someone else, that $250,000 FDIC insurance limit applies to each of you. So in the scenario above, let’s say it’s you as well as a spouse who are the account holders for the savings account and CD in question. In that case, your $300,000 in cash is fully protected because your total FDIC insurance limit increases to $500,000.

What about access to funds?

Many people don’t have anywhere close to $250,000 in the bank. So if you have less than that, there’s really no need to bank at multiple institutions if you’d rather keep all of your cash in the same place.

One thing you may be wondering is what happens if your bank fails, and you lose access to your money for a period of time while the FDIC takes over? It’s a valid concern.

Let’s say you have $50,000 in savings, so you’re fully protected from losses by the FDIC. If your bank goes under, will your money be accessible to you in three days? Five days? A week or longer?

The good news is that federal law requires the FDIC to make funds available to banking customers “as soon as possible” once a bank fails. Clearly, that’s a bit of a gray area, though.

But know this: Once SVB failed, customers were already able to access their funds the next business day following its collapse. Specifically, the FDIC took over SVB on a Friday, and by Monday, funds were available to customers.

Now, if you really want the maximum amount of protection, you may want to keep the bulk of your cash in one bank (provided it’s less than $250,000) but also keep a separate checking account or savings account with a small cushion at another bank. But for the most part, this isn’t a step you have to take if your total deposits are totally covered by FDIC insurance.

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