22 Nov FDIC Insurance
FDIC insurance is standard with most checking accounts up to a maximum of $100,000 balance per bank. There are stocks, bonds, treasury securities, and money market fund checking accounts (some through banks, but usually with brokers like Merrill Lynch or Charles Schwab), which pay higher rates of return but are not FDIC insured. Depending on the acceptable risk of the business owners and the balances in the accounts, the “correct” decision may vary. The main point is that whichever alternative is chosen, that it is a conscious decision by the business owner.
If a bank account balance is over $100,000 and in a standard checking account, it may be desired to open another account with a different financial institution to maintain FDIC insurance on all balances. Additional benefits include, developing another relationship that may result in better terms or service, in addition to protecting the balance with the FDIC insurance. If the determination is to keep the balance with the original bank, it may be prudent to place part of the money in a money market or CD that will generate higher interest since it will be over the cap of the FDIC insurance anyway.
For answers to frequently asked questions about FDIC insurance visit http://www.fdic.gov/deposit/deposits/insured/faq.html. For a guide on what is insured or not insured, visit http://www.fdic.gov/consumers/consumer/information/fdiciorn.html.