Q: What's the best bank for depositing a million dollars?
A: You should break this decision process into three parts:
- Figuring out how best to protect your money.
- Figuring out what products or services you need.
- Finding the best banks for those products or services.
Here are some details on what you should cover with each step.
1. Protecting your money
A key advantage of depositing money in a U.S. bank is that it can be insured by the FDIC. However, there are limits to that insurance.
The basic insurance limit is $250,000 per depositor at each bank. You can have more money insured at one bank if you have a joint account, or if the money is in separate accounts belonging to different legal entities. So, for example, if you and your spouse had a joint account, it could be insured for up to $500,000. Also, if you have some of the money in a taxable personal account and some in an IRA, each of those accounts could be insured up to $250,000.
If you cannot cover the full million in this fashion, the best thing to do would be to split it among multiple banks, since each depositor is entitled to $250,000 in insurance at each bank.
2. Selecting a product
Before you choose a bank, you should narrow down exactly what you need. If you have to keep all or most of the money fully liquid at all times, you should be looking for savings accounts or money market accounts. If you want to invest conservatively but can lock up the money for a few years, you might consider a certificate of deposit.
If you are investing for the very long-term, you may want to put some of that money in growth investments like stocks, but of course those products will not have the security of FDIC insurance.
3. Choosing a bank
Once you decide what you are looking for, you can start comparing banks to see which one offers the best rates for the products you need. Your amount would be considered a "jumbo" deposit, so you may be eligible for rates that depositors with smaller amounts cannot get. MoneyRates.com lists updated rates from banks from around the country -- including rates for jumbo savings accounts and jumbo CDs -- so you can easily shop for the best yields.
But there are two things to watch for in that process: First, since you will probably be opening some fairly large accounts, make sure that the rates you find are not subject to deposit limits -- it's no good finding a great rate if it does not apply to most of your account. Second, ignore teaser rates, since these usually expire after a short period of time.
Having to find a home for a million dollars is a nice problem to have. However, it is also a big responsibility, so a careful, step-by-step approach is the answer.
Got a question about saving, investing or banking? MoneyRates.com invites you to submit your questions to its "Ask the Expert" feature. Just go to the MoneyRates.com home page and look for the "Ask the Expert" box on the lower left.