Are you wary of keeping your money in the bank these days? If so, you’re probably not alone, and there may be good reason for this. Here are six reasons why keeping your money in the bank just isn’t as safe as it was in the past.
# 1 – Your money may not be protected at all
If your bank isn’t protected by the FDIC (Federal Deposit Insurance Corporation), your money isn’t protected if the bank goes under. Fortunately, most banks in the US are covered, but you can check whether yours is using this search on the FDIC website.
# 2 – Only some of your money may be protected
Even if your money is protected in general, it may not be fully safe. Depending on how much money you have in a particular bank, you may find that it isn’t all protected by the FDIC. This will usually only be the case if you have particularly large amounts in one specific FDIC-protected bank. For example, each bank account owner is protected for $100,000 per account (or more for a joint account). If you have an Individual Retirement Account (IRA), this is usually protected for up to $250,000 regardless of how much is in other accounts.
If you are unsure of how much of your money is likely to be protected, it’s a good idea to use the above search. Splitting your money between different FDIC-protected banks is recommended if you have more than the protected amounts in your account(s) in one bank.
# 3 – Your account could be frozen/levied
If you owe money, the money in your account isn’t necessarily as safe as you might think. Your bank account can be frozen without prior warning, often due to the fact that you owe money to creditors. If this happens to the account that you use for paying everyday expenses, this could potentially be a huge problem. In this type of scenario, you could find that your bank account is all but wiped out by your creditor and direct debits can continue to be taken from the account to cover repayments, thus landing you in overdraft territory. In addition to this, many banks will charge you fees (often as much as $100) if your account is levied, which increases the overdraft potential.
If you receive money for child support or certain types of benefits, these are often exempt from bank levies, but this differs from state to state. It is up to you to prove that part or all of the money in the account comes from these sources, otherwise it is considered fair game.
# 4 – Fraud is on the up
In the current economic situation, fraud is becoming more common as lenders look to reduce the amount of new credit that they dish out. This can make fraudsters more likely to target existing bank accounts and debit and credit cards. You may have noticed an increase in the amount of ‘phishing’ emails that are landing in your inbox as fraudsters look to fool the naive into giving their account details to what they think is the log-in page for their bank account(s). It’s just not emails that you have to worry about –phone calls asking you to confirm your bank details, card details and password are also on the rise. These are usually scams as reputable companies don’t ask for these kinds of details.
# 5 – Fees look set to rise
In a bid to increase profits, banking fees are predicted to keep going up. This may include fees for:
- Using ATMs (especially those not related to your particular bank)
- Using checking accounts (even those that were previously free)
- Bounced checks
- Overdraft charges
- Withdrawing cash in person (especially if you do so more than a couple of times per month)
- Making phone inquiries about your accounts (e.g. checking a balance or disputing a transaction)
- Currency conversions
Although individually these charges amount to only a handful of dollars each time, they could quickly add up over the course of a year and start to eat away at your account balance. If you’re the kind of person who is close to your overdraft limit on a regular basis, this can be more significant than it seems due to the charges that you’ll likely incur. It may not be a reason in itself to close your bank accounts, but it’s something to consider if fees rise as predicted.
# 6 – Interest rates tend not to tie in with inflation
Generally speaking, interest rates aren’t keeping pace with inflation at the moment. This means that if your interest rate is lower than the current rate of inflation, you’re actually losing money in effect, especially if your interest is taxed too. With current interest rates approaching rock bottom, it’s very likely that yours will be below inflation rates. Experts are predicting that inflation could be a problem for the US economy in months to come.
Reduce Your Risk
If you’re not sure how healthy your bank is considered to be performing, you can use the independent star rating from Bauer Financial. This estimates how likely a bank is to collapse in the near future. At the last count, a whopping 305 banks are considered to be ‘in trouble’, which is bad news for anyone who banks with one of those. If you have the bulk of your money in one bank which then goes under, it could be months before your request to receive your funds is processed. If you have money split across other banks, you’ll have money to access in the meantime.