The Federal Deposit Insurance Corp. (FDIC) is an independent federal agency insuring deposits in U.S. banks and thrifts in the event of bank failures. The FDIC was created in 1933 to maintain public confidence and encourage stability in the financial system through the promotion of sound banking practices.1

As of 2023, the FDIC insures deposits up to $250,000 per depositor as long as the institution is a member firm. It is critical for consumers to confirm whether their institution is FDIC-insured.2 The primary purpose of the FDIC is to prevent "run-on-the-bank" scenarios, which devastated many banks during the Great Depression. For example, with the threat of the closure of a bank, small groups of worried customers rushed to withdraw their money in those years.

After fears spread, a stampede of customers, seeking to do the same, ultimately resulted in banks being unable to support withdrawal requests. Those who were first to withdraw their money from a troubled bank would benefit, whereas those who waited risked losing their savings overnight. Before the FDIC, there was no guarantee for the safety of deposits beyond the confidence in the bank's stability. Understanding the FDIC

Because practically all banks and thrifts now offer FDIC coverage, many consumers face less uncertainty regarding their deposits. As a result, banks have a better opportunity to address problems under controlled circumstances without triggering a run on the bank.

In case of bank failure, the FDIC covers deposits up to $250,000, per FDIC-insured bank, for each account ownership category such as retirement accounts and trusts. This sum is adequate for the majority of depositors, though depositors with more than that sum should spread their assets among multiple banks.