Back in June 2016, I had a drink with a very smart friend who explained to me that he had all of his savings concentrated in two online savings accounts, including over $1 million in a savings account at subsidary of a UK bank, and that he slept well at night. Less than a week later, the UK's referendum on Brexit caused that bank to appear - at least for 24 hours - to be spiraling towards receivership. And, of course, less than a decade earlier, Lehman and Bears Stearns seemed to spiral into catastrophe from nothing, leading to sleepless nights for many, including savers who had cash deposits with those institutions.

Having money in excess of the Federal Deposit Insurance Corporation ("FDIC") limits - or National Credit Union Administration ("NCUA") limits for credit unions - defies the very point of having a savings account, and exposes you to unnecessary risks. There are so many FDIC insured banks with strong savings and short term CD rates that even the very wealthy can divide their money in $250,000 increments in a way to avoid overexposing themselves to a bank failure. (The super wealthy – those with tens of millions of dollars in cash - should look at CDARS programs to protect their assets from bank failures).

What is covered?

FDIC insurance is pretty simple. All you need to know is that it covers bank accounts, such as checking accounts, savings accounts and Certificates of Deposit. It does not cover other products you may purchase from a bank, such a mutual funds, commodities, annuities, or life insurance. (In the event of a bank failure, SIPC insurance may protect certain securities from disappearing, although it does not insure the value of those securities). The attraction in FDIC insurance is that backed by the full faith and credit of the US. As long as you stay within the limits, every penny in your bank accounts is going to be deposited in an account with your name on it the day after the bank becomes insolvent.

To be fully insured, you must make sure that your deposits follow the FDIC guidelines and limits. These guidelines are based on different account ownership categories, with up to $250,000 of coverage allowed for each category of account ownership you have in one bank, not by how many accounts you have in that bank. It is important to understand that if you have a CD with $250,000, a savings account with $250,000, and checking account with $100,000 at the same bank in the same ownership category, you are exposed to the bank in the amount of $350,000.

The account ownership categories are:

1. Single Accounts

A single account is a deposit held in one person’s name only or held in account for one person only.

2. Certain Retirement Accounts

This includes Traditional IRAs, Roth IRAs, SEP-IRAs, SIMPLE IRAs and self-directed defined contribution plans

3. Joint Accounts

A joint account is a deposit owned by two or more people.

4. Revocable Trust Accounts

In general, the owner of a revocable trust account is insured up to $250,000 for each unique beneficiary.  On April 1, 2024, the FDIC limited total coverage of all trust accounts to $1.25 million.

5. Irrevocable Trust Accounts

Irrevocable trust accounts are held in connection with a trust in which the owner gives up all power to cancel or change the trust.  On April 1, 2024, the FDIC limited total coverage of all trust accounts to $1.25 million.

6. Employee Benefit Plan Accounts

These are a deposit of a pension plan, defined benefit plan or other employee benefit plan that is not self-directed.

7. Corporation/Partnership/Unincorporated Association Accounts

Deposits owned by corporations, partnerships, and unincorporated associations, including for-profit and not-for-profit organizations.

8. Government Accounts (also called Public Unit accounts)

The United States, including federal agencies

• Any state, county, municipality (or a political subdivision of any state, county, or municipality), the District of Columbia, Puerto Rico and other government possessions and territories
• An Indian tribe

For complete guidelines for each type of ownership category, the FDIC has prepared this page. If you have specific questions about your own circumstances you should use the FDIC’s Electronic Deposit Insurance Estimator.

What about NCUA coverage?

The National Credit Union Administration provides very similar, though not identical coverage, to the FDIC that is also based on a $250,000 cap for each ownership category (with similar ownership category) for federally chartered credit unions. State chartered credit unions may also be protected so long as they display the NCUA logo on their website and in their facilities. If you think you may be in excess of NCUA limits at a single credit union, you should download and read the NCUA’s insurance brochure.

While all banks listed on BestCashCow.com are insured by the FDIC, please note that we also provide information on state chartered credit unions on BestCashCow.com that are not insured by the NCUA (this information can be found on the credit union's information page).

Check the best online savings rates and leading CD rates.

Global markets are continuing to reward risk and to provide very little yield in risk-free assets. While rates were expected to go up in 2016, we have seen a decline in long-term rates in the US (caused by a dramatic drop in long term rates in Europe). We have also seen rate compression in risk free assets (US Treasuries and now CDs). In 2014 and 2015, 5 year CDs offered rates as high as 2.50% APY. Now, even the best rates are closer to 2.00% APY (see the best rates here). Savings rates are barely holding constant with only a couple of the leading online rates holding above 1%. It seems that we are all starting to look like Japan where savers have been rewarded with extraordinary low interest rates for decades.

Find all of the best savings rates – online and locally – here.

As we look at a continuation of what has become a virtual zero rate phenomenon, a handful of banks are offering 1 year CD rates at or above 1.25%. In fact, the best CD rate available online today is 1.35% with a $5,000 minimum deposit. If you have money that you are resigned to keeping in cash and that is earning 0.90%, you can easily pick up an additional 50% return by getting into a one-year CD.

Ok, I hear you. I know that the actual pick up here is pretty low. In fact, you would need to move over $222,000 from an account earning 0.90% to a CD earning 1.35% just to make $1,000 more over the next year. And, that $1,000 is going to be fully taxable at the federal, state and local levels. However, if savings rates do not rise and you continue to earn 45 basis points more by being in short tern CDs, the additional gain becomes real. As the Japanese have found, when waiting for savings rates to rise, one year quickly turns to two, and two to 10 or 20, and the value of the additional interest, when compounded, does become meaningful. Using BestCashCow’s savings booster calculator makes this clearer.

Rates may be going up, but it is clear that they are not going to be rising very fast. If you have money that you cannot keep in risky assets (such as the stock market) and that you are unlikely to need for the next year, it may be time to start shifting into 1-year CDs. If savings rates were to spike or if you need your money for an unforeseen expense, you can ordinarily get it back by paying a modest early termination penalty (Sallie Mae, Colorado Federal and BAC Florida all have penalties on their 1-year CDs that are only 3 month of interest).

See the best one-year CD rates - online and in banks and credit unions near you - here.

Over the summer of 2015, HSBC aggressively advertised a "Promotional Premier Savings Account" designed to attract new depositors and new money to their branch banking system. As featured on BestCashCow, depositors were offered a promotional rate of 1.50% which was guaranteed until January 19, 2016.

Since the 1.50% rate was (and is) better than even the best online savings rates, HSBC attracted alot of new capital through this offer. As January 19, 2016 is approaching, these same depositors were probably preparing to move their savings out of HSBC to one of the leading online savings accounts at that bank's ordinary savings rate is currently only 0.15% on deposits over $100,000 (and 0.10% on deposits over $25,000).

In order to avoid losing the deposits that it courted so aggressively, HSBC has sent a letter to those who opened these accounts over the summer notifying them that from January 19, 2016 onwards they will receive 75 basis points more than the standard HSBC Premier Savings account. The letter further agrees that HSBC will provide at least 30 days advanced notice of any subsequent decision to remove the 75 basis point incentive.

As a result of this action, those depositors who took advantage of HSBC's summer promotional offer who keep over $100,000 at HSBC will be earning 0.90% going forward until further notice. This rate of course is not anything to write home about, and is currently 15 to 20 basis points below the best online savings rates available. However, it offers the hope that 2016 will finally bring more competition from other major banks with large branch networks to attract new capital and keep capital.

Find the best local savings rates where you live.