Are CDs FDIC Insured? - NerdWallet (2024)

FAQs

Are CDs FDIC Insured? - NerdWallet? ›

As with other bank accounts, a CD is federally insured for up to $250,000 at financial institutions that are members of one of two deposit insurance agencies: The Federal Deposit Insurance Corp. is the insurer for banks, and the National Credit Union Administration is the insurer for credit unions, which are the not- ...

The short answer is yes. Like other bank accounts, CDs are federally insured at financial institutions that are members of a federal deposit insurance agency. If a member bank or credit union fails, you're guaranteed to receive your money back, up to $250,000, by the full faith and credit of the U.S. government.

FDIC insurance works for CDs by giving account holders peace of mind even if their bank fails. It ensures that you won't lose a single cent as long as your balance doesn't exceed $250,000. If a bank goes under, the FDIC will take over the bank's assets and resume operations on behalf of the bank.

The FDIC Covers CDs in the Event of Bank Failure

But the recent regional banking turmoil may have you concerned about your investment in case of a bank failure. CDs are treated by the FDIC like other bank accounts and will be insured up to $250,000 if the bank is a member of the agency.

To determine your deposit insurance coverage or ask any other specific deposit insurance questions, please visit the FDIC Information and Support Center or call 1-877-ASK-FDIC (1-877-275-3342).

No investment is 100% safe from a default, not even certificates of deposit. Stay diversified and keep up with sound financial habits.

The FDIC does not license or register deposit brokers and an unscrupulous broker could mislead or defraud its customers. If the broker fails to place your funds into a CD at an FDIC-insured bank; your money will not be insured by the FDIC.

Market Crashes and CDs

Even if the market crashes, your CD is still safe. Your interest rate won't change, and your money is still insured. But, keep an eye on interest rates. After your CD term ends, you might find that new CDs have lower rates if the economy is still struggling.

CDs opened at FDIC-insured banks, or credit unions backed by the NCUA, are guaranteed by the federal government. Should the bank or credit union fail, your savings won't be lost, as long as you're within deposit limits.

Earning high interest means nothing if you have to forfeit it or your principal to access your money. A high-yield savings account or money market account would be better for your money. In sum, yes, you can lose money on a CD. But as long as you don't withdraw too early, you'll be left with at least your principal.

Why am I losing money in a CD account? ›

The most common way people lose money through a CD account is by withdrawing their funds before the term ends. When you take money out of your CD account before the maturity date, you'll typically have to pay an early withdrawal penalty.

Banks and credit unions often charge an early withdrawal penalty for taking funds from a CD ahead of its maturity date. This penalty can be a flat fee or a percentage of the interest earned. In some cases, it could even be all the interest earned, negating your efforts to use a CD for savings.

CD rates may not be high enough to keep pace with inflation when consumer prices rise. Investing money in the stock market could generate much higher returns than CDs. CDs offer less liquidity than savings accounts, money market accounts, or checking accounts.

Millionaires can insure their money by depositing funds in FDIC-insured accounts, NCUA-insured accounts, through IntraFi Network Deposits, or through cash management accounts. They may also allocate some of their cash to low-risk investments, such as Treasury securities or government bonds.

The FDIC adds together all deposits in retirement accounts listed above owned by the same person at the same insured bank and insures the total amount up to a maximum of $250,000. Beneficiaries can be named on these accounts, but that does not increase the amount of the deposit insurance coverage.

An account that contains more than $250,000 at one bank, or multiple accounts with the same owner or owners, is insured only up to $250,000. The protection does not come from taxes or congressional funding. Instead, banks pay into the insurance system, and the insurance provides their customers with protection.

CDs, like all deposit accounts, have FDIC insurance up to the $250,000 legal limit. Established by the Banking Act of 1933, the FDIC protects your money in the event of bank failure. So if your bank starts to go under, you don't need to rush to the nearest branch to withdraw all your money.

Examples of uninsured CDs are Yankee CDs, bull CDs, and bear CDs. Most CDs are insured by the FDIC or the NCUA. CDs, along with savings accounts and money market accounts, are savings vehicles that you can invest in at your local bank or credit union.