My Mistaken Interpretation of the FDIC’s Coverage

With the collapse of IndyMac and the news that it was the second largest bank failure ever (I’d never heard of them), the role of the FDIC is getting some press. So far, so good… In comparison to FEMA, the FDIC looks to have their act together.

Now I’ve always known about the whole $100,000 per account rule. Every bank teller window has a little sign. Every bank commercial mentions it with some super fast-talking at the end. It has something to do with the max that the FDIC would insure. Makes sense to me.

I don’t have any accounts that large, but when daydreaming about winning the lottery, I have put some thought into it.

Like, let’s say you win a million dollars. It’s no wonder that it’s suggested that you seek come money help before you even collect your winnings.

At first glance, it seems simple. Just open up 10 accounts and drop $100k in each one. Just to get you all set up before you start sending money this way and that way.

Simple enough, right?

But what about the interest? It’s going to put you well over the $100k mark in each account in no time…

Oh crap.

Alright, make it 12 accounts with $83k in each one. You know, room for growth. That would work, no?

I had it all planned out in my head. Probably not wisely, but I had it all planned out.

But now, having heard a few of the horror stories from account holders at IndyMac (as well as an hour or so or research on the FDIC website), I now realize that my plan wouldn’t work at all…

See, the FDIC really does insure $100000 worth. But it’s not per account like every single bank commercial I’ve ever seen seems to imply.

They only cover $100000 per depositor (in my case, per person) per bank.

There’s the catch. Per bank.

So my plan just got a lot more complex… Can you imagine having 12 different bank cards in your wallet?

(Oh wait, I can… I used to carry that many credit cards?!)

So now, upon winning the lottery, and before I start spending my new found fortune, I’d have to go out and find at least 12 different banks and open a new account at each one of them?

(I’m not sure I can even name more than 8 banks with local branches.)

Then, I’d have to keep track of where the balances fell in each account to make sure I don’t go over $100k or overdraw one of them. Wow… That’s a lot of work. And I’d still be too cheap to hire someone to do it for me…

Kind of makes the Scrooge McDuck method of banking look a lot more attractive…