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Banking

These accounts offer FDIC insurance for deposits greater than $250,000

Some institutions have begun to offer up to $3 million of FDIC insurance coverage.

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Since the collapses of Silicon Valley Bank and Signature Bank, coverage from the Federal Deposit Insurance Corporation (FDIC) has been in the spotlight.

The FDIC protects up to $250,000 per depositor, per bank for each type of account ownership category. This covers the most common deposit account types, including checking accounts, high-yield savings accounts, and certificates of deposits (CDs).

But some financial institutions (primarily fintechs and online banks) provide savers with FDIC coverage that exceeds the $250,000 limit — and in the wake of the recent banking collapse, they're increasing the amount savers can insure in a single account.

CNBC Select explains how the increased FDIC protection works and recommends several accounts offering it to depositors.

Accounts that are offering increased FDIC coverage

For most savers, the standard FDIC limit of $250,000 is more than enough to protect whatever money they're depositing with a bank or financial institution. But if you're a high net-worth individual or run a business, your deposits might exceed the FDIC limit. Rather than worry about what happens to your extra savings in the event your bank collapses, you could instead consider one of these accounts that offer additional protection through a network of partner banks.

Wealthfront's Cash Account offers $5 million of FDIC coverage for individual accounts and $10 million for joint accounts through partner banks. It offers a network of 19,000 free ATMs and fee-free transfers.

Wealthfront Cash Account

  • Annual Percentage Yield (APY)

    5.00% APY

  • Minimum balance

    None

  • Monthly fee

    None

  • Maximum transactions

    Unlimited transfers and free same-day withdrawals

  • FDIC insurance coverage

    Up to $8 million

Terms apply.

Pros

  • Above-average APY
  • No minimum balance or deposit
  • No monthly fee
  • Unlimited transfers and free same-day withdrawals
  • FDIC insurance up to $8 million

Cons

  • Limited customer support

Betterment also offers $2 million of FDIC insurance for individual Cash Reserve accounts and $4 million for joint accounts, as well as a no-fee experience and no minimum balance.

Betterment Cash Reserve

  • Annual Percentage Yield (APY)

    5.00% APY with new customer boost of extra 0.50% APY for 3 months (earn up to 5.50% APY)

  • Minimum balance

    $10 deposit

  • Monthly fee

    None

  • Maximum transactions

    Unlimited withdrawals

  • FDIC insurance coverage

    Up to $2 million

Terms apply.

SoFi, one of CNBC Select's top picks for high-yield savings account with a welcome bonus, is offering access to $2 million of FDIC insurance for individual checking and savings members, starting with new members. Existing members will become eligible and notified by email.

SoFi Checking and Savings

SoFi Bank, N.A. is a Member FDIC.
  • Annual Percentage Yield (APY)

    Members with direct deposit earn 4.60% APY on savings, no minimum balance needed. Members without direct deposit earn 1.20% APY on savings balances, and everyone earns 0.50% APY on checking balances.

  • Welcome bonus

    Earn a $300 welcome bonus when you direct deposit a total of $5,000 or more within 25 days of your first direct deposit. Get a $50 welcome bonus when you direct deposit between $1,000 and $4,999.99 within 25 days of your first direct deposit.

  • Fees

    No monthly fee and no excessive transaction fees.

  • No-fee overdraft protection

    No-fee Overdraft Coverage up to $50 for SoFi members with $1,000 or more in total monthly direct deposits. Purchases exceeding $50 are declined.

  • Offer ATM card?

    Yes, this account offers a debit card that allows purchases and ATM withdrawals. Terms apply.

  • Offer checking account?

    Yes, bundled with savings account.

  • Maximum transactions

    Up to 6 free withdrawals or transfers per statement cycle. Transaction amount limits apply.

How these accounts offer FDIC insurance beyond the standard limit

The process works by taking the money you place in the deposit account and spreading it across a network of banks that are FDIC insured. "If you were to deposit $2 million of cash at Betterment, what we would do is we would place $250,000 round robin to all of the banks [in Betterment's network]," says Mike Reust, President at Betterment. "We make sure we have enough banks to meet our promise to you, which is to offer a certain FDIC insurance limit. Instead of you opening an account at 10 places, we basically take care of it for you."

While these financial institutions handle how your money is moved between partner banks, you should still familiarize yourself with each bank in the company's network. You can find a list of partner banks on each institution's website, and your statements should tell you how your cash is allocated between these banks.

That's important because the institutions managing these accounts don't take responsibility for knowing if you already have money deposited with these banks independent of the account they offer. And if (for example) you already have a savings account with a partner bank, then you could end up having more than $250,000 deposited in one bank when the financial institution allocates part of your deposit to that bank. That means the excess amount would not be insured.

If you discover that you already have an account with a partner bank, you can either move that account or ask the financial institution not to use that bank when allocating your deposited money. The second option will lessen the FDIC insurance the institution provides, but you'll still have well over the $250,000 limit.

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How FDIC deposit insurance coverage works

FDIC insurance is automatically applied to any FDIC-eligible account. Each depositor is covered for $250,000 worth of deposits per depositor, per FDIC-insured bank, and per ownership category. To determine if your bank is FDIC-insured, you can use the FDIC's BankFind tool or check the bank's website or branch location.

It's worth noting that investment products — including mutual funds, annuities, stocks, and bonds — aren't covered by FDIC insurance.

Bottom line

Some institutions are able to add more FDIC coverage for your deposits by sweeping the deposits into different participating banks. If you tend to keep a lot of cash on hand, it could be worth looking into an account that offers more FDIC insurance than the $250,000 limit.

* SoFi members with direct deposit can earn up to 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. There is no minimum direct deposit amount required to qualify for the 4.60% APY for savings. Members without direct deposit will earn up to 1.20% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Interest rates are variable and subject to change at any time. These rates are current as of 12/12/23. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

Editorial Note: Opinions, analyses, reviews or recommendations expressed in this article are those of the Select editorial staff’s alone, and have not been reviewed, approved or otherwise endorsed by any third party.
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