Is My Money Safe in the Bank?

In times of economic unease — such as during a pandemic, when bank failures are trending or there’s talk of a possible recession — you may find yourself wondering whether your money is safe in your bank account.

The fact is that your money is protected in a bank — there’s no need to withdraw it for security reasons. Here's more about bank safety and why it shouldn’t be a concern, thanks to the system that insures your deposits.

» Get more from your savings: See our picks for the best high-yield online savings accounts

A bank account is typically the safest place for your cash, since banks can be insured by the Federal Deposit Insurance Corp. up to $250,000 per depositor, per insured institution, per ownership category. Banks that are insured by the FDIC often say “Member FDIC” on their websites.

If you bank with a different kind of institution, such as a neobank or a financial technology company that’s not an FDIC member itself, you can check to see if it partners with an FDIC-insured bank. If it does, it means your accounts are covered by federal insurance through the financial institution’s partner bank. These institutions often note “funds insured by FDIC” instead of “Member FDIC.” 

Similarly, your money is safe at a credit union with National Credit Union Administration insurance. Like FDIC insurance, NCUA insurance covers $250,000 per owner, per insured credit union, per ownership category.

In the event of a bank run or other bank failure, your money (within the stated limit) is protected and guaranteed to you. If you have more than $250,000 to deposit, you can open accounts at multiple banks or open accounts in different ownership categories (such as a single account and a joint account) and distribute your funds across each.

» Learn more: How to insure your money when you’re banking over $250K

With the events that have happened in the past few years — a global pandemic, the failures of multiple banks and several interest rate changes by the Federal Reserve, to name a few — you might question whether banks are truly a secure place to keep your funds. The answer is that yes, your money is safe in the bank. As long as your deposit accounts are at banks or credit unions that are federally insured and your balances are within the insurance limits, your money is safe.

Banks are a reliable place to keep your money protected from theft, loss and natural disasters. Cash is usually safer in a bank than it is outside of a bank. For instance, there’s no guarantee that funds kept in your home are safe from burglars or fires.

A bank failure happens when a bank can’t fulfill its obligations to depositors. For example, if a large number of customers believe that their bank is going to run out of cash, they can decide to withdraw their cash at the same time. This is what's called a bank run. Bank runs can be dangerous, self-fulfilling prophecies because these withdrawals happen so quickly that they deplete a bank's cash reserves while the bank’s remaining assets might be nonliquid and not immediately available to convert into cash.

» LEARN: Find out what to do when bank-run panic is trending

On the rare occasion when a bank fails, the bank is closed by a state or federal regulatory agency. That agency attempts to sell the failed bank to a healthy bank so customers can carry on with their accounts as usual. If that option doesn’t work out, the FDIC will pay customers by check for their deposits (up to the FDIC limits) within a few days after the bank is closed.

» Ask a Nerd: ​How Does SVB’s Closure Affect Me?

Although bank failures were a big topic in the news after the failures of Silicon Valley Bank, Signature Bank and First Republic Bank in early 2023, it’s unlikely that your bank will also fail. The situations that these banks found themselves in were highly unusual. (Read more about why these banks failed, and why your bank probably won’t.) For context, there are more than 4,700 FDIC-insured banks and more than 4,750 NCUA-insured credit unions that remain solvent.

Bank failures in general aren’t common. Since 2000, just a fraction of existing banks have failed: 566, to be exact. For context, 489 of those banks failed as part of the 2008-2009 financial crisis. Before the failures of SVB, Signature Bank and First Republic Bank in 2023, there hadn’t been a bank failure since that of Almena State Bank in October 2020.

» Your questions answered: All about the banking crisis of 2023

You should only take your money out of the bank if you need the cash. In the bank, cash is less vulnerable to theft, loss and disaster. And depending on the bank account, you could be earning interest on your cash that you won’t be earning if it stays under your mattress.

For example, if you keep $5,000 in the bank for a year in a high-yield savings account that earns 4% APY, you'll earn about $200 — compared to the $0 you'd earn by keeping your cash at home.

» Learn more: How to calculate interest in a savings account

While it’s true that your money is safe in the bank, you should still be aware of and know how to avoid banking scams and bank fraud. There are actions you can take and good habits you can follow to help protect your money.

A few general rules for avoiding banking scams are:

• Don’t share passwords or personal information with people who contact you claiming to be from your bank, utility company or mobile service provider, for example. Instead, call the bank or company yourself to confirm whether they need information from you and provide it then.

• Don’t click on links in emails or texts claiming to be from your financial institution. Instead, log in to your account or call your bank’s official phone number.

• Never make a financial transaction when you’re being pressured or rushed by an unfamiliar source (whether that’s someone you don’t know or someone whose identity you can’t confirm).

Other steps you can take to boost online banking safety include setting up email and text alerts for account activity and using password managers and multifactor authentication for logging in to your accounts.

» Learn more: How to boost your online banking safety