In the wake of the financial crisis and its resulting bank failures and bailouts, it's easy to feel as if you, as an individual consumer, has little control over what happens to your deposits.
The Federal Deposit Insurance Corporation (FDIC)'s Depositor Bill of Rights reminds us that any bank depositor at an FDIC-insured institution has the right to expect ten things. These rights affect every bank customer, but they may be particularly important for CD owners, since CDs represent bank commitments, sometimes for extended periods.
The FDIC Depositor Bill of Rights
- Automatic deposit insurance coverage when you open a deposit account at an FDIC-insured bank, with no additional action on your part.
- Separate FDIC insurance coverage for deposits held at different FDIC-insured banks.
- The ability to confirm that a bank is insured by using the FDIC's Bank Find service, or by calling the FDIC toll-free at 1-877-ASK-FDIC.
- FDIC insurance coverage of at least $250,000 for your deposits at an FDIC-insured bank. (MoneyRates.com note: Coverage is scheduled to revert back to $100,000 on January 1, 2014 for most accounts.)
- Deposit insurance coverage of more than $250,000 at a single bank when deposits are held in different "ownership categories," such as single, joint, and trust accounts.
- Confirmation that deposits are within the insurance limits by using the FDIC's online tool "EDIE the Estimator," or by calling the FDIC at 1-877-ASK-FDIC.
- Receive disclosure when a financial product offered by your bank is not covered by FDIC insurance.
- Prompt access to your insured deposits in the event your bank fails.
- Receipt of distributions from the receivership for uninsured deposits, as the sale of assets permits.
- Sleep well, knowing that since the creation of the FDIC 75 years ago, no depositor has ever lost one penny of insured deposits.
Assert More Rights in the Competitive Banking Market
In addition to the FDIC Depositor Bill of Rights, MoneyRates.com recommends four "preferred" rights its readers should assert as a banking customer in a competitive market:
Bank your way. Do you prefer to bank online or in person? At a full-service or specialty bank? Local bank or multi-national institution? There are literally thousands of FDIC-insured banks, so pick one that suits your preferences.
Expect good service. If your bank can't give you a prompt, accurate answer to your inquiries, be prepared to look elsewhere. There are plenty of options.
Compare CD rates before committing. Whether you are purchasing a CD for the first time or rolling over a maturing one, compare CD rates before you commit. It's always wise to compare bank rates for any sort of deposit product, but shopping is especially important when locking in CD rates for an extended period of time.
Get straightforward terms. Some CDs are callable, meaning the bank can terminate them early. Other CD rates are variable and depend on specific market returns. If you have a thorough understanding of special terms and believe they will work in your favor, then you might choose a complex product. Otherwise, insist on a straightforward CD, with a fixed rate and a set maturity date.