Silicon Valley Bank, a California-based bank that was primarily focused on technology, venture capital, and startups, collapsed quickly. This caused great concern about the deposits of billions of dollars.
Federal Deposit Insurance Corp. insured the bank. On Monday, the FDIC assumed control of SVB’s operations to ensure that customers didn’t lose their funds. Some of these customers were small businesses that had to be able pay employees. Fortunately, they have been spared financial disaster.
While the FDIC is trying to help SVB’s customers, you might still be curious about what you should do in case your bank goes under. Signature Bank in New York, which was also recently bankrupt, was also rescued by the FDIC. Bank failures could become a possibility, although it is unlikely. These are some of the most common questions that resulted from SVB’s collapse.
What does FDIC insurance do?
FDIC insurance covers your funds in the event that an FDIC-insured bank goes under. The insurance covers you up to $250,000 per institution, per depositor, for each ownership category, such as single accounts or trust accounts. If your bank balance exceeds $250,000, your money will be refunded to you regardless of what happens to the bank. There are other options to ensure your money is fully protected if your balance exceeds $250,000
How can I make sure all my funds are covered?
If your bank is federally insure, the website will have a “member FDIC” section at the bottom. To confirm whether your bank is insured, you can use the FDIC bank search engine. Your funds will be covered by the National Credit Union Administration (NCUA) if you have your money in a credit union. The coverage is usually the same.
What is the safety of my money in the bank?
Yes. Your money will be protected if your bank or credit union has federal insurance. The FDIC stated Monday that Silicon Valley Bank had “transferred all deposits, insured and uninsured of Silicon Valley Bank to Silicon Valley Bank N.A. a full-service bridge bank that will be operated under the FDIC.” Your funds will be protected even if your account has more than $250,000 of federally insured $250,000.
A “bridge banking” is a bank that bridges the operational gap between the time a bank goes under and the time the FDIC can stabilize the institution and put in place an orderly resolution.
What happens if I don’t get a check?
Payroll from Signature Bank accounts and SVB accounts shouldn’t cause any problems.
President Joe Biden stated Monday that all customers who have made deposits in these banks are safe and will have access to their money starting today. This includes small businesses that have small deposits in these banks and who need to pay their bills, make payroll and remain open for business.
What can I do to cover my expenses in the event that my bank closes?
It is important to be able to manage your expenses in the event that you lose your bank account.
Plan ahead. You might consider opening multiple accounts for your emergency fund so that even if one bank is temporarily closed, you have enough money to pay your bills. You might also want to keep some cash safe at home.
Figure out your essential payments. You will need to plan how you pay your most critical expenses if you lose your money suddenly. Contact your landlord, lender, or service provider for information about your rent, mortgage, and utilities. They might be able to help you get through a hardship program that will keep you going. You may be able to reduce the amount of food you have or find other services in your local area if you are having difficulty paying.
What happens if my payment applications are connected to SVB but they don’t work?
You can link another bank account to your payment app (e.g. Venmo or Cash App) to make it a preferred method of payment. You can also link your credit card to your profile as an option, but you will be charged a 3% fee.
Although bank failures are not common, the FDIC can usually protect customers. However, it can be quite jarring to see your bank shut down suddenly. It is always smart to have a backup plan when managing your finances.
(Disclosure: NerdWallet banked with SVB prior to its closure. )