Are CDs FDIC-Insured?

Certificates of deposit (CDs) are safety investments sold primarily by banks and credit unions. They are considered safe for a couple of reasons. First, the issuer offers a principal guarantee and in most cases, a fixed interest rate. Additionally, most bank CDs are insured by the Federal Deposit Insurance Corporation (FDIC), offering an additional layer of protection for the investor.

Understanding how FDIC insurance works is key to maximizing coverage of your CDs and other bank assets.

Are CDs FDIC-insured?

Most CDs sold by FDIC-member banks are insured up to $250,000 per depositor, per FDIC-insured bank, per ownership category. The coverage is automatic and free, and there are no fees or forms to fill out.

But there’s more to the story. Not all CDs are FDIC-insured. For example, the FDIC does not insure credit union CDs. Credit unions have their own insurer, the National Credit Union Administration (NCUA), that protects credit union deposit products, including CDs. In addition, some bank CDs fall outside of FDIC coverage, something we’ll explore a little later.

It’s also important to note that FDIC insurance protects more than CDs. Coverage also includes balances in checking, savings, and money market deposit accounts, negotiable order of withdrawal accounts, cashier’s checks, money orders, prepaid cards, and other official items issued by the same bank.

When calculating how much coverage you have, you must include your funds in all of those categories in the same bank under the same ownership category.

What CDs are not FDIC-insured?

CDs that FDIC-insured banks do not issue are not FDIC-insured. This includes CDs issued by:

Brokers

Generally, brokered CDs are not protected by FDIC. However, some brokers partner with FDIC-insured banks, and those CDs may be covered. Additionally, brokered CDs may qualify for separate coverage by the Securities Investor Protection Corporation (SIPC) provided the brokerage is a member.

Foreign banks

Foreign bank CDs, sometimes called “foreign currency CDs,” are not FDIC-insured if a foreign bank issues them. A very small number of U.S. banks issue FDIC-insured foreign currency CDs, provided the bank is a member.

Credit unions

As mentioned, CDs issued by credit unions are not FDIC-insured. However, most credit unions belong to the NCUA, which provides up to $250,000 coverage to CDs and other credit union accounts.

To find out if your bank is FDIC-insured, you can ask the bank, look for the FDIC logo on the bank’s website, or use the FDIC's BankFind tool to obtain detailed information about FDIC-insured banks. If the bank doesn’t appear in the FDIC database, it is not FDIC-insured.

What is the FDIC insurance limit on CDs?

The FDIC insurance limit on CDs is $250,000 per depositor, per insured bank, per account ownership category. If you have multiple CDs with the same bank, the insurance coverage will not exceed $250,000. If you have over $250,000 in CDs, you may want to consider spreading your deposits across multiple banks or account ownership categories to ensure that all your funds are FDIC-insured.

Remember that the $250,000 insurance limit includes not just CDs but all other covered categories, such as checking and savings accounts under the same depositor and ownership category at the same bank.

How does the FDIC insure CDs?

As stated above, when you deposit funds into an FDIC-insured bank, including when you purchase a CD, your deposited funds are automatically insured up to $250,000 per depositor (you), per insured bank, and per account ownership category.

There are 14 FDIC account ownership categories. If you deposited $250,000 into each category, your FDIC insurance coverage would amount to $3.5 million. As some categories provide coverage in excess of $250,000, the theoretical insurance amount is even higher.

Further, by taking advantage of FDIC rules regarding all three elements (bank, depositor, and ownership category), you can insure $250,000 in deposits many times over.

In the event of a bank failure, you would receive your deposited funds back. The FDIC provides this insurance by collecting premiums from banks and other financial institutions participating in the FDIC program.

What happens to a CD if the bank fails?

If your bank fails, the FDIC will reimburse you up to $250,000 for your deposits in a single ownership category. You will receive your money by check or by moving your funds to another FDIC-insured bank. If the FDIC transfers your funds to another bank, your CD's terms and interest rate may change. It’s important to contact your new bank if a transfer occurs, so you know your new terms and conditions.

The FDIC will pay interest on your CD until the bank fails. If your funds are transferred to another bank and you don’t like the new terms, you can withdraw your funds without penalty, even from a CD that has not matured. This may allow you to take out a new, higher-yield CD from another bank.

What happens if you have more than $250,000 in the bank?

If your deposits in a single bank, in a single ownership category, including CDs, exceed $250,000, the amount over $250,000 is uninsured, and you may not receive reimbursement of that money in the event of a bank failure.

Whether and to what extent you may be reimbursed for deposits in excess of $250,000 is up to the FDIC. For example, in 2023 so far, four banks have failed, including Silicon Valley Bank, Signature Bank, First Republic Bank, and Heartland Tristate Bank. In all four cases the FDIC and the acquiring bank guaranteed depositors full access to all deposits, even those over FDIC insurance limits.

It’s not a good idea to assume the FDIC will always cover excess funds like this. Fortunately, it’s not difficult to protect excess funds by spreading your deposits across multiple banks or account ownership categories. You should also seek the advice of a trusted financial advisor to determine what moves you should make to protect your money.

Pro tip: If you bank in Massachusetts, you should look into a bank that is part of the Depositors Insurance Fund (DIF). DIF banks insure all deposits above the FDIC limits. However, all of those banks are based in Massachusetts.

TIME Stamped: FDIC insurance applies to CDs in the same way that it applies to other savings accounts

The extreme financial repercussions of the Great Depression led President Franklin D. Roosevelt and the U.S. Congress to create the FDIC in 1933. Though there has been economic turmoil in the U.S. since then, the scale of bank failures seen at the time and the subsequent staggering loss of funds by bank customers have not been repeated.

FDIC insurance covers CDs and other savings accounts up to $250,000 per depositor, per insured bank, per account ownership category. You should always put your money in an FDIC-insured bank. For more information, check out our full FDIC insurance guide.