FDIC Insured Account

What is FDIC Insured Account?

FDIC Insured Account is a type of Bank account thrift account under the FDIC –Federal Deposit insurance Corporation. FDIC serves to be an independent agency that has the responsibility of protecting the respective customer deposits in cases of bank failures. You should also be aware of the FDIC insured account types.

The maximum amount that is insurable in a given qualified account tends to be $250,000 on a per depositor, per category, and per FDIC-insured bank Basis. This implies that if you tend to have the given amount in a particular bank account, and the bank would Fail eventually, then the FDIC is responsible for reimbursing any type of loss that you might have incurred. The amount that exceeds the value of $250,000 will be spread amongst several FDI-insured banks.

Getting an Understanding of FDI Insured Account

For understanding the way in which FDI insured accounts tend to function, you are required to understand the process of modern savings as well as that of the loan systems. In the modern era, bank accounts are not in the form of safe deposit boxes. Moreover, the depositor money is also not known to go into some individualized vault or drawer for future withdrawals. On the other hand, the banks are known to funnel the given amount of money from the accounts of the depositor for making new loans towards generating more revenues from the available interest.

The federal government states that most banks tend to keep just 10 percent of the overall deposits in hand. This implies that the other 90 percent of the deposits in the bank can be utilized for making loans. In simpler terms, it can be said that if you tend to make a deposit of around $1,000 deposit in your bank, then the bank is known to take around $900 from the given deposit while using the same for financing a home mortgage or a car loan.

The given type of banking is referred to as fractional reserve banking. This is because only a small portion of total deposits are stored as reserves at the given bank. The concept of fractional reserve banking helps in creating extra liquidity in the given Capital markets while helping towards keeping the interest rates low. However, it can also lead to the creation of an unstable banking environment.

It is also possible that the customers of the bank would simultaneously request over 10 percent of the total deposits back at any given time. When too many depositors would ask the given amount of money back, it is referred to as “Bank Run.” In such a case, the bank is required to turn away some customers by asking them to go empty-handed. At the same time, other depositors might end up losing confidence and asking their money back as well.