What does the FDIC only insure $250K of your money in one bank?

Question

If you keep more than $250,000 in one bank, the excess is not insured. This is so stupid. Because of that, I'm forced open multiple accounts at different bank. It's such a hassle. Why do they have such a limit?

Answer 1

To protect the government from paying out too much if the bank should fail

Joe

Many people have that much, most are elderly  and no longer need the growth from investments 

Or maybe they are just rich, Elvis had over $1 million in a checking account when he died (and back then the limit was $100k

Answer 2

It is done as a protection against the cost of bank failure.  "Multiple accounts" means you have over $500,000.   Nobody keeps $500,000 plus in savings accounts.  That is insane.  If your $500,000 was invested in the S&P500 one year ago, it would be worth $584,000. today.  The S&P500 is so safe it has been the buy it and forget it investment for decades.  You need to put some of that in a Roth IRA NOW.

Answer 3

If you actually had that much money, it'd be a shame to not be smart enough to know that's not the greatest place for your money in the first place. Secondly, are you really putting your money there because of the FDIC insurance? What fly-by-night bank would you even use where the insurance even matters?

FDIC insurance is really just something to make the uneducated feel good about keeping their money in the bank, because the biggest enemy of the bank is NOT what the bank invests in. It's simply everyone all wanting their money at the same time. Something NO bank can handle.

Answer 4

If you have that much saved and are using a bank, you're foolish. Your capital should be invested elsewhere.

Answer 5

Very few kinds of insurance are written without a limit.

If you have this much money, you can get a much better return than a bank interest rate.

Answer 6

Because that is all that Congress will let them insure.  It's not the FDIC's decision.  They have the limit because Congress makes them have that limit.

Answer 7

And poor people think the rich have it so easy  .

Source(s): Sarcasm

Answer 8

If you truly had that much money you would know that you can have a million dollars at one bank with 4 different types of accounts.

The limit is for the same reason you "don't put all your eggs in one basket".