Chase and Citibank to Drop Out of FDIC Coverage Program

Wednesday, December 30, 2009

Chase and Citibank announced via their websites that they are no longer participating in (Federal Deposit Insurance Company) FDIC Transaction Account Guarantee Program. Both banks are still insured under the general FDIC program, however.
What is the FDIC? It’s the government entity that makes it safer to keep your money in the bank rather than stuff it in a mattress. In the case of a bank failure, your funds deposited in that failed bank are guaranteed and will be returned to you. From the FDIC website:

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the United States government that protects funds depositors place in banks and savings associations. FDIC insurance is backed by the full faith and credit of the United States government. Since the FDIC was established in 1933, no depositor has ever lost a single penny of FDIC-insured funds.
What does dropping the Transaction Account Guarantee protection mean to you? Actually, you should be pretty scared. Taking a protection away from your hard earned funds is not a good thing. Nor is it a good sign of the health of these banks. Dropping out of the program means that the banks don’t have to be quite as strict with their banking procedures.
What is the difference between coverage under the Transaction Account Guarantee Program and FDIC’s general deposit rules? With the general deposit rules, any account which is covered under the general rules is covered up to $250,000 but above this amount, the funds are not covered. If funds are covered under the Transaction Account Guarantee Program, funds exceeding $250,000 are still covered. It’s sort of double protection.

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