Risk-Free Banking

Three Four banks have failed since July, eight nine so far this year, and there are upwards of 90 more on the FDIC’s “troubled” bank list. It’s a nerve-wracking time, to be sure. So what can you do to reduce you risk when it comes to banking? Here’s a list of five tips from a recent article in Money Magazine:

• Check out your bank at Bankrate. While I’ve argued in the past that Bankrate’s Safe & Sound ratings aren’t 100% reliable, that mostly has to do with being skeptical of apparently “healthy” ratings. If Bankrate says that a bank is in trouble, then it probably is.
• Use the FDIC’s insurance estimator. I’ve talked about FDIC insurance limits in the past. This online calculator is an easy way to make sure you’re safely under the limits. If you use a credit union instead of a bank, keep in mind that NCUA insurance limits are virtually identical to FDIC limits, but they have a calculator of their own.
• Change your accounts’ ownership status. If you’re over FDIC (or NCUA) insurance limits, you can re-title your accounts to increase your coverage. For example, a husband and wife could each have individual accounts plus a joint account. This would afford up to $400k in protection. If all else fails, open accounts at additional banks.
• Check out the Certificate of Deposit Account Registry Services (CDARS). This program lets you keep up to $50 million in one “home bank” while maintaining full insurance coverage. The downside is that the associated interest rates are a bit lower than you might otherwise get.
• Consider moving your HELOC. If you have a home equity line of credit at a troubled bank, you might want to think about looking for greener pastures. If your bank fails and a buyer can’t be found, you’re HELOC could wind up frozen or even closed.

It really just comes down to common sense. If you use your head, stick with a relatively safe bank, and avoid unnecessary risks, you shouldn’t have too much to worry about.

Edit to add: Moments after publishing this, I discovered that another bank failed today. Hat tip to News and Verse for pointing this out.

Source: Money Magazine