Is My Bank in Trouble?

Is My Bank Safe?

Is your bank safe? Banks are supposed to be a safe place for cash. However, you may wonder if your money is really safe. How can you tell if a bank is in trouble? Let’s review how you can ensure that your money is in a safe place.

Deposit Insurance

First, you should be sure that your 'safe money' is in a safe place. One of the most powerful safeguards is insurance backed by the US government. For banks, you’ll want FDIC insurance. Credit unions use NCUSIF insurance.

Make sure that you understand limitations on these programs. Y can still lose money if you have too much in one institution.

• How FDIC Insurance Works
• How NCUSIF Insurance Works
• Is My Account Safe? (Banks, Credit Unions, Brokers, and Retirement Plans)

If your money is fully and properly insured, you have very little to worry about. If your bank goes belly-up, you probably won’t notice. FDIC and NCUSIF programs generally ensure that you can use your same accounts, cards, and websites without interruption. There is rarely any reason to take your money out of a failed bank or participate in a bank run.

• What Happens in a Bank Failure?
• What is a Bank Run?

Bank Ratings

If you want to avoid bank failures, you can try to avoid weak banks. To identify weak banks, check rating services to see how your bank or credit union is rated. Some of the most useful free services include:

• Find the Safest Banks
• Bankrate’s Safe and Sound Ratings
• BauerFinancial, Inc.

Read the News

If you have money at risk, you can also follow the news to see which banks might be close to failure. Of course, nobody knows what will happen ahead of time and you might be led astray. However, there was a lot of talk about Washington Mutual and Wachovia before they failed in 2008.

Note that if you are fully insured you can of course ignore the stories and leave your money where it is. Another bank will buy the assets and you'll be able to use your money without interruption in most cases. Participating in a bank run can help accelerate or cause a bank's failure, and it might just be a waste of your time.