SoFi

Deposit insurance is a guarantee by the federal government that the money in a bank customer’s account is insured up to a specific amount. Deposit insurance is typically provided to bank customers by the Federal Deposit Insurance Corporation (FDIC), an independent federal agency that works to make sure deposits are safe in the event of bank failures. Currently, up to $250,000 per depositor, per account ownership category, per insured bank is covered as long as the money is in an FDIC-insured financial institution. The National Credit Union Administration, or NCUA, covers money held in credit unions in a similar manner.

Most, but not all, banks offer this kind of safety net. Read on to learn more about how deposit insurance works, plus ways to make sure your money is protected.

Definition and Purpose of Deposit Insurance

Deposit insurance protects the money customers have in deposit accounts in FDIC-insured banks in case there is a bank failure. What is the FDIC specifically and what does it do? The agency was created in 1933 after the Great Depression, when thousands of banks failed. The purpose of the FDIC is to protect bank customers and maintain stability and confidence in the U.S. financial system. Since its creation, no depositor has lost any FDIC-insured money.

The funds you have in an FDIC-insured bank, whether it’s in a savings account or a checking account, are insured up to $250,000 per depositor, per account ownership category, per bank. In the very rare event that your bank fails, your money will be covered up to the insured amount.

In the case of bank failure, the FDIC historically pays customers within a few days up to the insured limit. This typically happens in one of two ways: The FDIC provides the customer with the insured amount in a new account at another insured bank, or they send the customer a check for the insured amount.

How Deposit Insurance Works

Deposit insurance works by protecting customers’ money in the event their bank fails. If a bank shuts down, the FDIC reimburses depositors’ money through the Deposit Insurance Fund (DIF). The DIF is backed by the U.S. government and funded by a type of insurance premium that banks pay plus interest earned on Treasury notes bought by the FDIC.

While most banks in the U.S., including online banks, are insured by the FDIC, not all of them are. Banks must apply for FDIC coverage. When you visit your bank, look for FDIC signs or ask a bank representative if the institution is FDIC-insured.

(Credit unions insure their money separately through the National Credit Union Administration, or NCUA vs. the FDIC.)

Account Coverage

When it comes to how much money banks insure, the amount is typically up to $250,000 per depositor, per account ownership category, per bank, though some banks may offer options for receiving additional coverage through special programs they’ve created.

Account ownership categories include:

•   Single accounts, such as a checking account or savings account that’s yours alone

•   Joint accounts, like an account you have with a spouse or another person

•   Certain types of retirement accounts you have at a bank, including an individual retirement account (IRA)

•   Trust accounts

•   Corporation, partnership, or unincorporated association accounts

In practical terms, what this means is that if you have two single accounts at the same bank, such as a checking account and a savings account, you’ll be insured for up to $250,000 of the combined balance of the two accounts. So you’ll want to make sure that both accounts don’t add up to more than $250,000. Anything over that amount would not be insured.

However, if an individual has a single account and a joint account at the same bank, or a single account and an IRA, they will be insured for up to $250,000 for the single account plus another $250,000 for the joint or IRA account because the accounts fall into different account ownership categories.

And if you have two single accounts but each one is at a different FDIC-insured bank, they will each be covered for up to $250,000. That’s because they’re at two separate institutions. In addition, some banks offer programs in which they will allocate deposited funds that total more than $250,000 per depositor among insured partner banks. This can allow the customer to have FDIC coverage in excess of the usual limits while one bank manages their money.

You can use the FDIC’s Electronic Deposit Insurance Estimator (EDIE) to calculate your specific account coverage.

As a bank customer, you don’t have to do anything to get FDIC coverage. As long as your account is in an FDIC-insured bank, your money, up to the limit per account ownership type, is automatically covered. It can add to your sense of financial security to know you have liquid assets protected in this way.

History of Deposit Insurance

Deposit insurance dates back to the Great Depression, when approximately 9,000 banks across the U.S. failed between 1930 and 1933. The Depression caused widespread panic, and many people rushed to the bank to withdraw their funds. Banks couldn’t handle all the withdrawal requests, and many were forced to shut down. Many bank customers lost their money.

Because of that, President Franklin Roosevelt signed the Banking Act of 1933 into law, which created the FDIC to protect bank depositors. In January 1934, the agency began operating, insuring $2,500 per depositor. Five months later, the FDIC-insured amount was doubled to $5,000, and the FDIC became a permanent part of the U.S. financial system by law in 1935.

Fifteen years later, the FDIC insurance coverage was raised to $10,000 per depositor, and at that point it fully protected 99% of all deposit accounts in FDIC-insured banks. In 1969, the coverage was raised to $20,000, and in1974, amid high inflation and rising interest rates, it was increased to $40,000.

In 1980, President Jimmy Carter signed the Depository Institutions Deregulation and Monetary Control Act into law, raising the FDIC-insured limit to $100,000. Over the next 14 years, during the Savings and Loan Crisis, approximately 1,300 savings and loans failed, along with more than 1,600 banks. The FDIC covered the bank losses.

When the financial crisis known as the Great Recession hit in 2008, dozens of U.S. banks failed. But no insured bank depositors lost their money. (In the ensuing seven years, hundreds failed.) Two years later, in 2010, President Barack Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act into law, permanently increasing the FDIC insurance limit to $250,000.

Recommended: APY Interest Calculator

Deposit Insurance Around the World

According to the Center for Global Development, 80% of high-income countries currently have deposit insurance in place, and the number of lower-come countries with deposit insurance has more than tripled. Here’s an overview of deposit insurance in the U.S. and the European Union.

United States (FDIC)

In the U.S, deposit insurance is handled by the FDIC, which was created as an independent federal agency in 1933, after the Great Depression. The FDIC works to make sure deposits are safe in the event of bank failures. Up to $250,000 per depositor, per account ownership category, per bank is insured as long as the money is in an FDIC-insured bank.

The other purpose of the FDIC is to help maintain stability and public confidence in the U.S. financial system. Since its inception, no depositor has lost a penny of FDIC-insured money.

European Union

In the European Union (EU), deposit insurance is known as national deposit guarantee schemes (DGS), and they protect the savings of EU depositors whose banks fail. Deposits are guaranteed up to €100,000. DGS are also designed to help prevent mass withdrawals in the event a bank fails and to promote financial stability.

In 2015, a proposal was introduced by the European Commission to set up one European deposit insurance scheme (EDIS) that would build upon the national DGS system in EU countries. Meant to strengthen and unify coverage, the EDIS would be a single European fund to insure up to €100,000 per depositor, per bank in case of bank failure. However, as of late 2024, the EDIS was still being debated by EU members.

Benefits of Deposit Insurance

Deposit insurance has a number of advantages for bank customers. These benefits include:

Insuring Deposits

Deposit insurance can provide peace of mind to depositors at FDIC-insured banks because up to $250,000 per depositor, per bank, per account ownership category is protected if the bank fails. Since the agency was created, no depositor has lost money in an FDIC-insured account.

Protecting Different Types of Deposit Products

FDIC protects various types of deposits at insured banks, such as:

•   Checking and savings accounts

•   Money market deposit accounts (MMDAs)

•   Certificates of deposit (CDs)

•   Prepaid cards, as long as certain conditions are met

Covering Various Account Ownership Categories

Deposit insurance pertains to different types of account ownership categories, including:

•   Single accounts, such as a checking account or savings account

•   Joint accounts

•   Certain types of retirement accounts a customer has at a bank, including IRAs

•   Trust accounts

•   Corporation, partnership, or unincorporated association accounts

Depositors are covered up to $250,000 per account ownership category, per FDIC-insured bank.

Automatic Protection

There’s no need to enroll in or pay for FDIC protection. As long as you deposit money in an FDIC-insured bank, your funds are automatically protected up to the limit.

Helping to Maintain Stability and Confidence in the Financial System

By protecting depositors’ money in case of a bank failure, deposit insurance helps instill confidence in the financial system and maintain the system’s stability.

Recommended: Money Management Tips

Limitations and Criticisms

For all its benefits, deposit insurance has come under criticism. And it does have limitations. Here are some of the main critiques.

May Encourage Banks to Take On Excessive Risk

Some critics believe that deposit insurance may encourage banks to take more risks since they know the FDIC will protect insured deposits and help bail out failing banks.

Coverage Is Not Enough

For many individuals, the $250,000 FDIC-insured limit may be enough (and, as noted above, some banks offer programs for enhanced coverage). But for businesses, especially those that use banks for payroll and other purposes, the limit may be too low.

Protection Does Not Extend to Certain Assets

There are a number of assets that deposit insurance does not cover. These include stocks; bonds; mutual funds; annuities; life insurance policies; cryptocurrency; and U.S. Treasury bonds, bills, and notes.

Uninsured Deposits

Deposits of more than $250,000 may be held by individuals and businesses. This could leave the account holder vulnerable in the very rare instance of a bank failure since insurance typically covers up to $250,000. (That said, some financial institutions may offer programs to protect more than that amount.)

In addition, not all banks are FDIC-insured. Individuals who have deposits in uninsured banks are at risk of losing their money if their bank fails. If your bank is not FDIC-insured, you may want to consider closing your bank account and switching to a financial institution that can give your money FDIC protection.

Finally, some depositors have more than $250,000 in two of the same account ownership category types. Their combined balance in a checking and a savings account might exceed the limit, for instance. They may not be aware of this, or perhaps they just haven’t gotten around to transferring money between banks to stay under the limit.

Other depositors may have combined bank accounts after getting married, for instance, and their new balance may exceed the limit.

If you have more than the insured limit in your bank account, there are ways to maximize FDIC insurance that you can explore.

How to Check If Your Deposits Are Insured

As mentioned, although the FDIC insures deposits in most banks, not all banks are protected. How can you tell if your bank is? If you use an online bank, the institution’s website should contain information about its FDIC coverage. If you use a brick-and-mortar bank, the next time you visit your local branch, check for a sign that says “FDIC-insured.” Each FDIC-insured financial institution is required to display official signs.

In the near future, it should be even easier to spot FDIC signage. In 2025, banks will be required to display the FDIC official digital sign on certain automated teller machines and to display it near the name of the bank on all bank websites and mobile applications.

Another way to find out if your deposits are insured is to use the FDIC BankFind tool.

Common Misconceptions About Deposit Insurance

There are a number of myths about deposit insurance. Here are some common misconceptions to be aware of.

•   Misconception: Every bank is FDIC-insured.
Fact: Most banks in the U.S. are FDIC-insured, but not every bank is. Look for FDIC signs at your bank’s branch or call the institution and ask them. You can also use the FDIC BankFind tool mentioned above.

•   Misconception: A bank customer has to apply for deposit insurance.
Fact: Customers do not need to apply for or buy FDIC insurance. The coverage is automatic for deposit accounts at FDIC-insured banks up to $250,000 per depositor, per account ownership category, per bank.

•   Misconception: Each deposit account a customer has is fully FDIC-insured.
Fact: The $250,000 limit applies per depositor, per account ownership category, per bank. So if you have two accounts in the same account ownership category type, such as a single checking account and a single savings account, you would be insured for up to $250,000 of the combined balance of each account.

•   Misconception: Every financial product offered by a bank is insured by the FDIC.
Fact: Deposit insurance only covers certain deposit accounts at an FDIC-insured bank. This includes checking and savings accounts, certain retirement accounts like IRAs containing deposit accounts, CDs, and money market deposit accounts. Investment products that are not deposit products, such as mutual funds, stocks, bonds, and annuities, are not FDIC-insured.

The Future of Deposit Insurance

Deposit insurance has changed numerous times throughout its history, and it’s possible it could change again. The FDIC has recently proposed certain reforms. In a May 2023 report, the agency outlined three options for deposit insurance reform.

The first is to leave the framework of the system as it is, but possibly raise the $250,000 limit. The second is to offer unlimited insurance to all bank depositors. And the third option is to provide targeted insurance with different limits for different account types. So, for instance, business accounts might get substantially higher insurance limits than other types of accounts.

The FDIC said that of these three options, targeted coverage “best meets the objectives of deposit insurance of financial stability and depositor protection relative to its costs.” However, action by Congress would be required to move forward.

The Takeaway

The Federal Deposit Insurance Corporation (FDIC) provides insurance that can help protect bank depositors in the very rare event of a bank failure. Its programs also help maintain stability and confidence in the U.S. financial system. As long as your bank is FDIC-insured, you are covered for up to $250,000 per depositor, per account ownership category. Deposit insurance applies to checking and savings accounts and CDs, among other deposit accounts. FDIC coverage is automatic — you don’t have to apply for or purchase it.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What is the FDIC insurance limit per depositor, per insured bank?

The FDIC insurance limit per depositor per insured bank is $250,000 per account ownership category type. Account ownership categories include single accounts; joint accounts; trust accounts; and corporation, partnership, or unincorporated association accounts.

Does deposit insurance cover investment products like stocks and bonds?

Deposit insurance does not cover investment products like stocks and bonds. It also does not cover mutual funds, life insurance, or annuities. Deposit insurance only covers certain bank deposit products such as CDs and money market deposit accounts, certain retirement accounts like IRAs, and checking and savings accounts.

How quickly can I access my insured deposits if a bank fails?

If a bank fails, the FDIC has historically paid customers their insured deposits within a few days. Typically, the FDIC will either provide the customer with the insured amount in a new account at another insured bank, or they’ll send the customer a check for the insured amount.

Photo credit: iStock/ovenimo

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.