Function

• The FDIC insures depositors at a member bank up to $250,000 for all combined deposits at that bank. This limit is in effect as of 2010. Insurance premiums paid by the bank pay for the insurance fund, which the full faith and credit of the U.S. government guarantees. In some cases, depositors could receive more than $250,000 in coverage through the use of joint accounts and retirement accounts, which have different rules.
  
  

Increased Limits

• If the limit of $250,000 is too low for your requirements, and you do not meet the guidelines for protection in a joint account, there is a way to receive more coverage. The FDIC insures up to $250,000 in deposits at each member bank  This protection is for separate banks only, and does not include separate branches of the same bank.
  
  

Benefits

• If an owner of an FDIC-insured account dies, the accounts stay insured for six additional months unless someone authorized by the deceased to make changes to the account does so. If a person has deposits at two banks and the banks merge, the FDIC insures the accounts as if the banks were separate for six months.
  
  

Significance

• In the late 1990s and the early part of the new millennium, the FDIC's role shrank and it cut its staff from about 23,000 people in the early '90s to about 4,500 in just under 10 years. While its chairman fought to raise insurance limits and its influence, Congress refused these requests. Some even argued that it was time to drop the FDIC. In 2008 and later, the FDIC soared back into the spotlight, with the credit crunch that hit so many banks hard.
  
  

Misconceptions

• Money market savings accounts are often confused with money market mutual funds, but they are very different. Money market mutual funds are not FDIC-insured and invest in short-term commercial receivables. They are purchased directly from the mutual fund company or a broker. Money market funds do not have a six-withdrawal-per- month limit like money market savings accounts. You start a money market savings account at a bank, and they work like any other savings account; they lend money to earn interest.
  
  

Considerations

• Money market mutual funds showed signs of stress in September 2008. The Reserve, the original money market mutual fund, lost money for the first time in its history. The news of trouble in these funds resulted in almost $150 billion being withdrawn from money market mutual funds. FDIC-insured money market accounts were a safe place for money in volatile economic times.