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A certificate of deposit (CD) is a product offered by banks and credit unions that offers an interest rate premium in exchange for the customer agreeing to leave a lump-sum deposit untouched for a predetermined period of time. Almost all consumer financial institutions offer them, although it’s up to each bank which CD terms it wants to offer, how much higher the rate will be vs. the bank’s savings and money market products, and what penalties it applies for early withdrawal.Shopping around is crucial to finding the best CD rates because different financial institutions offer a surprisingly wide range. Your brick-and-mortar bank might pay a pittance on even long-term CDs, for example, while an online bank or local credit union might pay three to five times the national average. Meanwhile, some of the best rates come from special promotions, occasionally with unusual durations such as 13 or 21 months, rather than the more common terms based on 3, 6, or 18 months or full-year increments.Being open to different institutions and a variety of terms is key to scoring the highest returns.KEY TAKEAWAYSTop-paying certificates of deposit pay higher interest rates than the best savings and money market accounts in exchange for leaving the funds on deposit for a fixed period of time.CDs are a safer and more conservative investment than stocks and bonds, offering lower opportunity for growth, but with a non-volatile, guaranteed rate of return.Virtually every bank, credit union, and brokerage firm offers a menu of CD options.The top nationally available CD rates are typically three to five times higher than the industry average for every term, so shopping around delivers significant gains.Although you lock into a term of duration when you open a CD, there are options for exiting early should you encounter an emergency or change of plans.How Does a CD Work?Opening a CD is very similar to opening any standard bank deposit account. The difference is what you’re agreeing to when you sign on the dotted line (even if that signature is now digital). After you’ve shopped around and identified which CD(s) you’ll open, completing the process will lock you into a four things.The interest rate: Locked rates are a positive in that they provide a clear and predictable return on your deposit over a specific time period. The bank cannot later change the rate and therefore reduce your earnings. On the flip side, a fixed return may hurt you if rates later rise substantially and you’ve lost your opportunity to take advantage of higher-paying CDs.The term: This is the length of time you agree to leave your funds deposited to avoid any penalty (e.g., 6-month CD, 1-year CD, 18-month CD, etc.) The term ends on the “maturity date,” when your CD has fully matured and you can withdraw your funds penalty-free.The principal: With the exception of some specialty CDs, this is the amount you agree to deposit when you open the CD.The institution: The bank or credit union where you open your CD will determine aspects of the agreement, such as early withdrawal penalties (EWPs) and whether your CD will be automatically reinvested if you don’t provide other instructions at the time of maturity.Once your CD is established and funded, the bank or credit union will administer it like most other deposit accounts, with either monthly or quarterly statement periods, paper or electronic statements, and usually monthly or quarterly interest payments deposited to your CD balance, where the interest will compound.Volume 75%2:01Certificate of Deposit (CD)Why Would I Open a CD?Unlike most other investments, certificates of deposit, or CDs, offer fixed, safe—and generally federally insured—interest rates that can often be higher than the rates paid by many bank accounts. And CD rates are generally higher if you’re willing to sock your money away for longer periods.As a result of the Federal Reserve’s rate hikes since 2017, CDs have become a more attractive option for savers who want to earn more than most savings, checking, or money market accounts pay, but without taking on the risk or volatility of the market.CDs vs. a Savings or Money Market AccountCertificates of deposit are a special type of savings instrument. Like a savings or money market account, they provide a way to put money away for a specific savings goal—such as the down payment on a house, a new vehicle, or a big trip—or to park funds that you simply don’t need for day-to-day expenses, all while earning a certain return on your balance.But whereas savings and money market accounts allow you to vary your balance by making additional deposits, as well as up to six withdrawals per month, CDs require one initial deposit that stays in the account until it reaches its maturity date, whether that’s six months or five years later. In return for giving up access to your funds, CDs generally pay higher interest rates than savings or money market accounts.How Are CD Rates Determined?Anyone who’s been following interest rates or business news in general knows that the Federal Reserve Board’s rate-setting actions loom large in terms of what savers can earn on their deposits. That’s because the Fed’s decisions can directly affect a bank’s costs. Here’s how it works.Every six to eight weeks, the Fed’s Federal Open Market Committee (FOMC) decides whether to raise, lower, or leave alone the federal funds rate. This rate represents the interest that banks pay to borrow money through the Fed. When Fed money is cheap (i.e., the federal funds rate is low), banks have less incentive to court deposits from consumers. But when the federal funds rate is moderate or high, banks can do better by paying consumers a competitive rate for their deposits.In December 2008, the Fed reduced its rate to the lowest level possible of essentially zero as a stimulus to lift the U.S. economy out of the Great Recession. Even worse for savers was that it left rates anchored there for a full seven years. During that time, deposit rates of all kinds—savings, money market, and CDs—tanked.Since December 2015, however, the Fed has been gradually increasing the federal funds rate, in light of metrics showing growth and strength in the U.S. economy. As a result, the interest banks are paying on deposits has been rising for more than three years, with the top CD rates now an attractive option for certain cash investments.When considering opening a CD or how long a term to choose, pay attention to the Fed’s rate-setting movements and plans. Opening a long-term CD right before a Fed rate hike can hurt your future earnings, while expectations of decreasing rates can signal a good time to lock in a long-term rate.Beyond the Fed’s action, however, the situation of each financial institution is an additional determinant of how much interest it is willing to pay on specific CDs. For instance, if a bank’s lending business is booming and an increasing amount in deposits is needed to fund those loans, the bank may be more aggressive in trying to attract deposit customers. By contrast, an exceptionally large bank with more than sufficient deposit reserves may be less interested in growing its CD portfolio and therefore offer paltry certificate rates.Are CDs Safe?Certificates of deposit are one of the safest savings or investment instruments available, for two reasons. First, their rate is fixed and guaranteed, so there is no risk that your CD’s return will be reduced or even fluctuate. What you signed up for is what you’ll get—it’s in your deposit agreement with the bank or credit union.CD investments are also protected by the same federal insurance that covers all deposit products. The FDIC provides insurance for banks and the NCUA provides insurance for credit unions. When you open a CD with an FDIC- or NCUA-insured institution, up to $250,000 of your funds on deposit with that institution are protected by the U.S. government if that institution were to fail. Bank failures are exceptionally rare these days. But it’s good to know that a bank failure won’t put your funds in jeopardy.The key to ensuring your funds are as safe as possible is to make sure you choose an institution that carries FDIC or NCUA insurance (the vast majority do, but a small minority carry private insurance instead), and to avoid exceeding $250,000 in deposits in your name at any one institution. If you are holding more than that amount in deposits, you can maximize your coverage by spreading your funds across multiple institutions and/or more than one name (e.g., your spouse).When Is Opening a CD a Good Idea?Certificates of deposit are useful in a few different situations. Perhaps you have cash you don’t need now, but will want within the next few years—maybe for a special vacation or to buy a new home, car, or boat. For near-term uses like that, the stock market generally isn’t considered a suitable investment as you could lose money over that period of time.Or maybe you simply want some portion of your savings invested very conservatively, or shun the risk and volatility of the stock and bond markets altogether. Though CDs don’t offer the growth potential of equity or debt investments, they also don’t carry a risk of downturns. For money that you want to absolutely ensure will grow in value, even if modestly, certificates of deposit can fit the bill.One of the downsides of CDs can also be a useful feature for some savers. For those who worry they won’t have the discipline to avoid tapping their savings, the fixed term of a CD—and the associated penalty for early withdrawal—provide a deterrent to spending that regular savings and money market accounts do not.One version of this is using CDs for your emergency fund. This allows you to ensure you always have sufficient reserves on hand in case of an emergency because the amount in the CD will never decrease. And though you may incur a penalty if you have to dip into your funds early, the idea is that you would only do this in a true emergency, not for lesser but tempting reasons. All the while, you’ll be earning a better return while the funds are invested than if you had deposited them in a savings or money market account.ProsOffers a higher rate than you can earn with a savings or money market accountPays a guaranteed, predictable rate of return, avoiding the volatility and losses that are possible with stocks and bondsIs federally insured if opened with an FDIC bank or NCUA credit unionCan help fend off spending temptations since withdrawing the funds early triggers a penaltyConsCannot be liquidated before maturity without incurring an early withdrawal penaltyTypically earns less than stocks and bonds can over timeEarns a fixed rate of return regardless of whether interest rates rise during the termWhere Can I Get a CD?Virtually every bank and credit union offers at least one certificate of deposit, and most have a wide array of terms on offer. So not only is your local brick-and-mortar bank an outlet, but so is every bank or credit union in your community, as well as every bank that accepts customers nationwide via the internet.In addition, you can open CDs through your brokerage account. We’ll explain more on these later, but in short, these are bank certificates as well. Your brokerage firm simply serves as a middleman.Why It’s Important to Shop AroundBefore the internet, your CD choices were essentially limited to what you could find in your community. But with the explosion of online rate shopping, plus the proliferation of internet banks—and traditional banks opening online portals—the number of CDs one can consider is astounding. It’s now possible to shop for CDs from about 150 banks that accept customers nationwide and allow for opening an account online or through the mail. In addition to that, you’ll have access to a number of regional and state banks, as well as credit unions, that will do business with you based on your residency in their state.As we’ve mentioned, though, the range of CD rates across these different institutions can vary widely. It’s a mistake to just open a CD at the bank where you already have a checking relationship without investigating how its rates compare with those you can earn elsewhere.Fortunately, our weekly rate research will put the very best nationally available rates in front of you for every term, making it easy to maximize your earnings. You should still shop for options within your state or community, but with our lists of the top nationally available rates, you’ll be able to easily determine which rates are worth your consideration and which are not.The top-paying CDs in the country typically pay three to five times the national average rate, so doing your homework on the best options is a key determinant on how much you can earn.How Much Do I Need to Open a CD?Each bank and credit union establishes a minimum deposit required to open each CD on its menu. Sometimes a bank will set a minimum deposit policy across all CD terms it offers, while some will instead offer rate tiers, providing a higher APY to those who meet higher minimum deposits.In theory, having more funds available to deposit will earn you a higher return. But in practice, this doesn’t always hold true. For instance, having $25,000 ready for deposit will occasionally enable you to open a CD that others with lesser amounts could not. But many of the Top 10 rates in each CD term can be achieved with modest investments of just $500 or $1,000. And the vast majority of top rates are available to anyone with at least $10,000. A $25,000 deposit is only occasionally required for a top rate.Which CD Term Should I Choose?There are two important considerations when deciding how long a CD term is right for you. The first centers on your plans for the money. If it’s for a specific goal or project, the expected start of that project will help you determine your maximum CD term length. In contrast, if you’re just socking away cash for which you don’t have a specific purpose in mind, you may opt for a longer term so as to maximize your interest rate.Secondly, you’ll want to consider what’s expected to happen with the Fed’s rate. If it’s anticipated that the Fed will raise rates—and therefore bank and credit union CD rates will likely rise—short- and mid-term CDs will make more sense than long-term CDs, since you won’t want to be committed to a lesser rate for five years when new, higher rates appear. Conversely, an expectation that rates will decrease in the near term may trigger you to want long-term CDs, so you can lock in today’s higher rates for years to come.What Is a CD Ladder and Why Should I Build One?Smart CD investors have a specific tactic for hedging against rate changes over time and maximizing their return. It’s called a CD ladder and it enables you to access the higher rates offered by 5-year CD terms, but with the twist that a portion of your money becomes available every year, rather than every 5 years. Here’s how to do it.At the outset, you take the amount of money you want to invest in CDs and divide it by five. You then put one-fifth of the funds into a top-earning 1-year CD, another fifth into a top 2-year CD, another into a 3-year CD, and so forth through a 5-year CD. Let’s say you have $25,000 available. That would give you five CDs of varying length, each with a value of $5,000.Then, when the first CD matures in a year, you take the resulting funds and open a top-rate 5-year CD. A year later, your initial 2-year CD will mature, and you’ll invest those funds into another 5-year CD. You continue doing this every year with whichever CD is maturing, until you end up with a portfolio of five CDs all earning 5-year APYs, but with one of them maturing every 12 months, keeping your money a bit more accessible than if all of it were locked up for a full five years.Some CD investors also do a shorter version of the CD ladder, utilizing 6-month CDs at the bottom end of the ladder and 2 or 3 year CDs at the top. Here you would have funds becoming accessible twice a year instead of just once annually, but you’d be earning top rates from 2- to 3-year CDs instead of 5-year rates.Why You Should Be Open to Odd-Term CDsWhether you’re building a CD ladder or are saving towards a specific goal with a known timeline, stay open-minded to the very best CD deals you find rather than getting hung up on a specific term. The reason this is important is that, when some banks and credit unions offer a promotional CD to attract new customers, they may stipulate an unconventional term.For instance, some of the best CD rates you’ll see have unlikely terms like 5 months, 17 months, or 21 months. It may be to stand out or, perhaps, to match the birthday the bank is celebrating, or any number of other reasons. But if you can be flexible in considering these odd-term certificates instead of the conventional term you were planning, you can sometimes find yourself with a better-paying opportunity.How Are CD Earnings Taxed?When you hold a CD, the bank will apply interest to your account at regular intervals. This is usually done either monthly or quarterly, and will show up on your statements as earned interest. Just like interest paid on a savings or money market account, it will accumulate and be reported to you in the new year as interest earned, so that you can report it as income when you file your tax return.Sometimes people get confused about this because they are not able to actually withdraw and use those interest earnings. So their expectation is that they will be taxed on the earnings when they withdraw the CD funds at maturity (or sooner if they cash out early). This is incorrect. For tax-reporting purposes, your CD earnings are taxed at the time the bank applies them to your account, regardless of when you withdraw your CD funds.What Happens to My CD at Maturity?In the month or two leading up to your CD’s maturity date, the bank or credit union will notify you of the impending end date. Its communication will also include instructions on how to tell it what to do with the maturing funds. Typically, it will offer you three options.Roll over the CD into a new CD at that bank. Generally it would be into a CD that most closely matches the term of your maturing CD. For example, if you have a 15-month certificate concluding, they would likely roll your balance into a new 1-year CD.Transfer the funds into another account at that bank. Options include a savings, checking, or money market account.Withdraw the proceeds. They can be transferred to an external bank account or mailed to you in a paper check.In any case, the communication to you will stipulate a deadline for you to provide instructions, with an indication of what the institution will do in lieu of receiving your guidance. In many cases, its default move will be to roll your proceeds into a new certificate.Missing the bank’s deadline for instructing it how to handle the proceeds of your maturing CD can lead to involuntarily locking yourself into a subpar rate for years to come, or incurring an unwanted—and potentially hefty—early withdrawal penalty because you waited too long before extracting your funds.Should I Let My CD Roll Over?As a general rule, letting your CD roll over into a similar CD term at the same institution is almost always unwise. If you still don’t need the cash, and are interested in starting a new CD, rolling it over is certainly the path of least resistance. But it also virtually never the path of maximum return.As we’ve mentioned, shopping around is imperative if you want to earn the top rate on your CD investments. And the odds are low that the bank where your CD is maturing is currently a top-rate provider among the hundreds of banks and credit unions from which you can choose a CD. It’s not impossible you’ll do well with a rolled-over CD, but the probabilities are against you, and shopping around is always your better bet.Even if you find your existing bank is indeed a top contender, you’ll be able to move into that CD purposefully and with confidence that you’ve done your homework to score a the best possible return.What If I Need to Withdraw My Money Early?Even though opening a CD involves agreeing to keep the funds on deposit without withdrawals for the duration of the term, that doesn’t mean you don’t have options if your plans need to change. Whether you encounter an emergency or a change in your financial situation—or simply feel you can use the money more usefully or lucratively elsewhere—all banks and credit unions have stipulated terms for how to cash your CD out early.The exit won’t be free, of course. The most common way that financial institutions accommodate a premature termination is by assessing an early withdrawal penalty (EWP) on the proceeds before your funds are distributed, according to specific terms and calculations that were set out in your deposit agreement when you first opened the certificate. This means you can know before you agree to the CD if the early withdrawal penalty is acceptable to you.Most typically, the EWP is charged as a number of months’ interest, with a greater number of months for longer CD terms and fewer months for shorter CDs. For instance, a bank’s policy might be to deduct three months’ interest for all CDs with terms up to 12 months, six months’ interest for those with terms up to 3 years, and a full year’s worth of interest for its long-term CDs. These are just examples—every bank and credit union sets its own early withdrawal penalty, so it’s important to compare EWP policies whenever you are deciding between two similar CDs.It’s especially wise to watch out for early withdrawal policies that can eat into your principal. The typical EWP policy described above will only cause you to earn less than you would have if you’d kept the CD to maturity. You will generally still have earnings, as the EWP will usually only eat up a portion of your earned interest. But some particularly onerous penalties exist in the marketplace, where a flat-percentage penalty is applied. Since this percentage can outweigh what you’ve earned on a CD you haven’t kept very long, you could find yourself collecting less in proceeds than you invested. As a result, these types of EWPs are best avoided.Always check a bank’s early withdrawal policy before committing to a CD. If it’s especially aggressive—or you can find another CD with a similar rate and a milder term—you’ll be wise to stay away from the toughest penalties.Specialty CDs: Bump-Up, Add-On, No-Penalty, Jumbo, and IRAThe most common CD type follows the standard formula of depositing your funds, letting them sit untouched until the end of the term, and withdrawing them upon maturity. But banks and credit unions also offer a variety of specialty certificates with different structures and rules.Bump-up CDsThese are sometimes called raise-your-rate certificates. Bump-up CDs offer savers a chance to access a higher rate usually one time during their term. So if you open a 5-year certificate and rates rise during that period, you’ll have one opportunity to lock in at a higher rate currently offered by the bank, which will then apply for the duration of your term. Occasionally, bump-up CDs will allow two rate increases, although only for long-term CDs.Add-on CDs,Add-on CDs let you play around with your deposit amount, instead of your interest rate. Here you can open the CD with one amount, but make additional deposits to increase your invested principal. Some banks will allow as many add-ons as you like; others will stipulate a certain number of allowable add-ons per time period (e.g., per month or quarter), and a few will limit the add-ons to just one or two during the full term.No-penalty CDsThese sound enticing, as they seem to provide the interest rate benefit of a certificate of deposit, but with less risk should you need to cash out early. No-penalty CDs can indeed bridge the gap between a fully accessible savings account and a CD with an early withdrawal penalty. But as you can guess, "no penalty" comes with a price tag: a lower interest rate than you would be able to earn with a traditional CD. So it’s important to compare the rates of no-penalty CDs with what you can earn from a top savings or money market account.Jumbo CDsThese are another product you may encounter when shopping for certificates. Jumbos are simply CDs with a large minimum deposit. No governing body prescribes the floor for calling a CD a “jumbo,” so each bank decides for itself. The most typical threshold is a $50,000 minimum deposit. Some institutions call $25,000 CDs a jumbo (or perhaps “mini jumbo”) certificate, while others reserve the jumbo label for CDs of at least $100,000.IRA CDsCertificates of deposit can also be a useful savings vehicle for retirement funds. Many banks and credit unions offer IRA CDs. Some have a separate menu of CDs that are available as IRAs, while other institutions allow any of their standard CDs to be set up as IRA CDs. One difference in either case is that IRA CDs must be held in an officially designated IRA account.Getting a CD: Direct vs. Brokered CDsIf you have a brokerage account, you may have noticed CDs on offer there and wondered how they differ from certificates of deposit opened directly with a bank or credit union.The first point is that brokered CDs are bank CDs, with the brokerage firm serving as a process-simplifying middleman. That said, there are some important differences.Lower ratesAlthough brokered CDs occasionally offer rates competitive with direct bank certificates, more typically the rates on brokered CDs are lower. If maximizing your CD returns is a priority, you’ll generally be better off going straight to the source.But what brokered CDs give up in rates they counter with convenience, especially for those holding multiple CDs. That’s because brokered CDs will be included on the same regular monthly or quarterly statements you already get for your brokerage account, with all maturity dates and terms shown. This makes tracking what you hold, and when each will mature, much simpler.More convenience...Opening a brokered CD is also a bit easier. As you already have an account with the brokerage firm, it will acquire the CD on your behalf. This spares you the bank paperwork of directly opening a CD and the extra statements you get afterward. Termination is also simplified: When the CD matures, the funds will typically move into your cash account at the brokerage firm....Except if you need to withdraw earlyEarly withdrawals are treated much differently for brokered CDs than direct bank certificates. If you need to cash out a brokered CD early, you are required to sell it on the secondary market. Although access to this marketplace is provided by your brokerage firm and is generally simple to navigate, there are no guarantees on what price you’ll be able to secure for your certificate. Key factors include whether you’re selling during a rising or decreasing interest-rate environment and the time left on your certificate.Selling on the secondary market is not necessarily a negative — it doesn’t always lead to subpar returns. But what you give up is any guarantee or predictability on how much of your proceeds you’ll retain.Specialty CDs from Your BrokerBesides the standard brokered CD, there are two kinds of specialty CDs that are generally found only through brokerage firms:Callable CDsA callable certificate is a specialized CD, on which the issuing bank retains the right to recall the CD at any time. So while you hope to be locked into a certain interest rate for a certain number of years, at any point the bank can decide to end that arrangement and return your funds to you. While this won’t result in any penalties or losses for you, it can cause you to lose the opportunity of a favorable rate that was locked in for the future. For this privilege, the bank generally pays a somewhat higher interest rate. If this is a risk you want to avoid, then search your brokerage firm’s listing for “non-callable CDs”.Zero-coupon CDsAnother specialty CD you might find at your brokerage firm is a zero coupon certificate. These CDs carry a face value, much like a savings bond does, and are sold for some lower initial price. The most important thing to know about zero coupon CDs is that you will be taxed on the earned interest every year, even though you will not realize the certificate’s gain until it matures. So careful tax planning is recommended.

What happens to my money if the bank fails?Only bank failures are coveredFDIC insurance applies only if your bank fails. ... When a bank fails, the FDIC must collect and sell the assets of the failed bank and settle its debts. If your bank goes bust, the FDIC will typically reimburse your insured deposits the next business day, says Williams-Young. Jul 16, 2015If your bank or credit union fails and your funds are insured, your money is safe. The federal government, with backing from the US Treasury, can replace any money that was lost by the bank.Here's what happens when your bank failsMarcie Geffner,Bankrate.comJul 16, 2015, 1:32 PM[Did you know that the amount of money in your bank account matters in the unlikely event your bank fails?While your deposits are insured for up to $250,000 by the Federal Deposit Insurance Corp. or FDIC, that doesn't mean every account at a particular bank is covered for that amount. The way you structure your accounts could put you at risk. But there also are ways to set up accounts so you're insured for far more than $250,000."A lot of consumers don't understand what the limits are," says Thomas Healy, deputy chief compliance officer at Ally Bank. "People think it's $250,000. Period."What is FDIC insurance?Since it was established in 1933, the FDIC has provided insurance on your money in case your bank goes belly up.The insurance covers checking, savings and money market accounts, and certificates of deposit, or CDs. It also covers other types of accounts, such as individual retirement accounts, or IRAs, and trust accounts.All state and nationally chartered banks must carry the insurance, says FDIC spokeswoman LaJuan Williams-Young.FDIC insurance doesn't cover investment products, such as mutual funds, annuities, life insurance policies, stocks, bonds or the contents of your safe-deposit box.If your money is on deposit at a federally chartered credit union or the vast majority of state-chartered ones, you have coverage through the National Credit Union Administration, or NCUA, which operates similarly to the FDIC.FDIC insurance coverage limitsYes, you have coverage up to $250,000, but that doesn't mean every account you have is insured for that much. Instead, coverage is based on how the accounts are owned.Single accountsThe maximum amount of coverage for single accounts at one bank is $250,000. All single accounts at the same bank are added together. Let's look at the example of an account holder we'll call Mark.Joint accountsEach co-owner receives $250,000 in insurance for each account, plus $250,000 in insurance for individual accounts at a bank. Let's look at an example of married account holders we'll call Ron and Pat.You can boost your coverage limits higher by opening other types of accounts within the same bank. Other ownership categories include:Irrevocable trusts.Employee benefit plan accounts.Corporation, partnership and unincorporated association accounts.Government accounts."It's very easy as an individual to have $1 million (insured) -- if not more, in some cases -- at specific institutions," Healy says.Consumers need to keep in mind that their accounts are still subject to FDIC limits even if they have accounts at different branches of the same bank, Healy says. But if they have accounts at two different banks, the insurance limits apply at each bank individually. They aren't lumped together.More on insurance coverageThe FDIC offers multiple ways for depositors to find out how to set up their accounts to maximize their protection:A toll-free consumer hotline, 1 (877) ASK-FDIC or 1 (877) 275-3342, allows depositors to talk to a live person at no cost.An online customer assistance form allows depositors to ask questions or submit complaints by email.An automated interactive online service, the Electronic Deposit Insurance Estimator, also known as "EDIE," helps depositors analyze whether accounts are properly set up.Depositors can ask questions or submit complaints by mail to FDIC, Attn: Deposit Insurance Outreach, 550 17th St. NW, Washington, D.C., 20429-9990.Only bank failures are coveredFDIC insurance applies only if your bank fails. And after a few volatile years, bank failures have again become rare. Just a handful of banks have been shuttered in 2015.That's a huge improvement. From 2008 to 2012, the FDIC reported 465 bank failures. The largest was Washington Mutual, which had $307 billion in assets when it failed in 2008. The government blamed the failure of WaMu's high-risk lending strategy.When a bank fails, the FDIC must collect and sell the assets of the failed bank and settle its debts. If your bank goes bust, the FDIC will typically reimburse your insured deposits the next business day, says Williams-Young.Banks cover you in case of fraudIt's a different story if your bank account is hacked or someone writes a bogus check and drains your account."It's only for bank failure that FDIC insurance covers the account," Williams-Young says.Instead, it's the banks themselves that are covering your losses if someone steals your money, says Doug Johnson, senior vice president of payments and cybersecurity policy for the American Bankers Association, or ABA. "Banks as a matter of policy fully reimburse customers for fraud on their accounts."Banks can purchase insurance to protect against losses from fraud, and also have reserves to cover such losses, Johnson says.A study by the ABA found that in 2012, fraud against deposit accounts cost banks $1.74 billion, but banks prevented $13 billion in fraud, Johnson says.If you suffer a loss due to fraud, you should report it to your bank as soon as possible so it can be investigated. "We're getting pretty good at doing the investigations," he says.By law, banks have to give customers provisional credit within 10 days. "They generally give provisional credit much sooner, or full credit," Johnson says.]What Happens to Your Money in a Bank Failure?BY JUSTIN PRITCHARDUpdated December 05, 2018[Banks are the safest place to keep your cash. Nevertheless, bank failures happen from time to time. Here's a look at what causes bank failures and what you can do about them. The main thing to know in a bank failure is that your money is probably safe. If your money is FDIC insured, you probably don’t need to panic.What Causes Bank FailuresBanks go under when they are no longer able to meet their obligations. The bank might lose too much on investments, or the bank may be unable to provide cash when depositors demand it (see below).Ultimately failures happen because banks don't just keep your money in vaults. When you walk in and deposit cash (or deposit funds electronically), the bank invests that money. A simple form of investment is making loans to other bank customers so they can earn interest — and pay you interest on your deposits.Banks also invest in much more complicated ways. If the bank takes large losses in any one area, it risks failing.What Happens in a Bank Failure?Most US banks are FDIC insured. If you are not banking at an FDIC insured institution, you're taking a huge risk. When these banks fail, the FDIC takes over. They may sell the bank to another (stronger) bank, or they may operate the bank for some time as a federally owned bank.The FDIC insures deposits up to $250,000, so keeping more than that at any bank may put your money at risk. However, it is possible to have more than $250,000 insured at one bank if several people or entities have an interest in the money. For example, retirement accounts and savings accounts for different family members can increase your protection. Take the time to understand FDIC limits if you have more than $2500,000 at the bank.Customer ExperienceFor many customers, a bank failure is a non-event. Customers continue to use the checks, debit cards, and electronic transfer instructions that they used before the bank failure. At some point, customers may eventually get new checks and cards.​TimeframesThe FDIC does not publish a specific timeframe for resolving bank failures. They note that historically they have made funds available within one business day. They try to close banks down on Fridays and get back to "business as usual" by Monday morning.However, circumstances with a given bank failure or with your accounts can slow the process down. The FDIC's first choice is to create a new bank for seamless operations until your account is sold to another bank. In some cases, this option is not available and they cut you a check for your insured deposits.Bank Runs and Bank FailuresAfter a bank failure is announced, there is little reason to make a run on the bank if your assets are insured. If the FDIC has already taken over, your money is no longer held by the weak and failing bank. If you want to get your money out and use a different bank, you can write a check or transfer your money electronically to the new bank.If the FDIC has not found a successor bank, you will not have access to your money and you'll have to wait for a check from the FDIC. In either case, there's nothing you can do after a bank failure is announced to affect how much money — if any — you'll lose.Uninsured DepositsIf you have uninsured deposits at an FDIC insured institution, you may have a problem. The FDIC typically makes insured deposits available immediately after a bank failure. Uninsured deposits may not be available for years. The FDIC has to sell the institution and its assets and see how much money (if any) is left to distribute to creditors.Destroyed BanksSometimes bank branches are destroyed as a result of natural disasters or terrorism. Physical destruction is different from bank failure. Again, if your accounts are insured the event is most likely just an inconvenience — not something that will completely ruin you.​Avoiding Bank FailuresIt is difficult to know which banks will fail. The FDIC does not announce bank takeovers ahead of time. The best course of action is to make sure that you’re observing FDIC limits and not taking any risks.Some bank rating services may help you avoid bank failures. These services look at banks’ strength, business models, and exposure to various risks. You can also gain some insight by calculating your bank's Texas Ratio. However, bank failures can be difficult to predict, especially by outsiders, so it's wise to keep your funds insured.]