March 2009: e-Wealth Coach Email
This month’s e-Wealth Coach is Tom Mayhew, senior vice president at National Cooperative Bank. At NCB, Tom is responsible for generating national deposits for NCB’s customer base while managing a portfolio of approximately $1.2 billion.
Protecting Your Deposits
Dear Saver,
In today’s troubled market, where we hear daily about bank mergers and buyouts and the possibility of bank failures, it’s understandable that you want to make sure your bank is stable and your deposits are safe.
The current financial market can at times make us feel puzzled or at the very least concerned about the future of our personal wealth. Can you with any certainty describe the current health of your financial provider? If the answer is no, then here a few good tips to help you start down the right path.
First, assess whether you have funds over the current Federal Depository Insurance Company (FDIC) limit at any one financial institution. Recently, the FDIC temporally increased the insured deposit threshold to $250,000 from $100,000. Ensuring that all of your bank investments are inside the threshold limits is the critical first step and a “must have” in the current economical environment. The temporary increase is set to run through December 31, 2009.
If you have more than $250,000 to invest, there are additional steps and options available to perfect and insure your total cash position. A common practice in the market is to open multiple accounts at different financial institutions. Each completely separate bank or financial institution that is insured by FDIC should cover deposits up to the current threshold limit of $250,000. Your social security number, or commonly referred tax identification number is usually used to determine that position.
Another option is to contact a financial institution that offers CDARS ®, Certificate of Deposit Account Registry Service. This service allows you to deposit funds with a participating financial institution and receive full FDIC insurance up to $50 million.
CDARS works by dividing big deposits into amounts less than $100,000 and spreads the money across a network of FDIC-insured banks. The program enables customers to bank with one institution, but have the benefit of accessing full-insurance coverage for all certificates of deposits. For example, customers with accounts at NCB consider it the “home base” and can choose between CD maturities ranging from four weeks to five years. A single interest rate is set by the home bank, and applies to all the specific CD terms. The CDARS service provides one simple, consolidated statement avoiding the need to track multiple accounts.
It is also prudent to know a bank’s financial health and balance sheet. If your bank is offering irrationally high deposit rates, there may be something more to the story. Your financial institution might be trying to increase deposits or raise money fast by offering such aggressive rates. It is common practice for federally-insured institutions to report and make public their balance sheet and financial performance. As a consumer, you can access information on your financial institution by going to www.fdic.gov or by accessing their financial statements on the banks’ website.
With your due diligence complete and the bank’s financial health confirmed, consumers and businesses are now ready to benefit from their saving, and ensure their financial health for years to come.
Sincerely,
Tom Mayhew
Sr. Vice President
NCB