Are High Yield Savings Accounts FDIC Insured?

You work hard for your money, so it only makes sense that you want it to be protected. After all, the money you place into a savings account is there to support your financial future, whether you’re saving to cover emergencies or pay for your next family vacation. The good news is that high yield savings accounts held at depository institutions that are members of the Federal Deposit Insurance Corporation (“FDIC”) are insured against bank insolvency by the ‘Deposit Insurance Fund’, which is backed by “full faith and credit” of the federal government. This means that FDIC-insured accounts are a safe way to protect your savings. In this article, we’ll explore what FDIC insurance is, how it relates to high yield savings accounts, and how to check if your bank is FDIC-insured.



Key Highlights:

• High yield savings accounts (HYSA) with FDIC Member banks are a safer way to save and earn competitive returns, offering federally-backed protection through FDIC insurance.
• The FDIC insures deposits up to $250,000 per depositor, per bank, for each ownership category.
• FDIC insurance covers accounts such as checking savings (including HYSAs), money market, and certificates of deposit (CDs), but not investments or safe deposit box contents.
• If your deposits in one FDIC ownership category at the same institution exceed $250,000, consider whether your unique situation is suitable for opening accounts in other ownership categories, such as revocable informal trusts (meaning deposit accounts with beneficiaries).
• High yield savings accounts offer more safety and stability than non-FDIC insured accounts, making them a smart addition to your financial strategy in many cases.
  
  
  
  

What is FDIC insurance?

The Federal Deposit Insurance Corporation (FDIC) is an independent agency of the federal government that helps to stabilize and instill confidence in the nation’s financial system. It does so by taking measures including:

• Insuring deposits against risk of loss due to bank failure up to $250,000 per depositor, per insured bank, for each ownership category (e.g., single, joint, trust, business, etc.)
• Stepping in during bank failures to act as receiver of the insolvent bank by undertaking the sale/collection of assets of the failed bank and settling its debts, including claims for deposits in excess of the insured limit¹.
• Providing direct federal supervision to certain state-chartered financial institutions to ensure consumer protection, safety, and soundness.
• Created in 1933 in response to the numerous bank failures of the Great Depression, the FDIC now insures trillions of dollars of deposits at banks across the country. Each member bank pays an amount for FDIC insurance based on factors such as size, total assets, and riskiness.
  
  
  
  

How does FDIC insurance apply to high yield savings accounts?
A high yield savings account (HYSA) is a term often describing deposit accounts designed to offer a higher interest rate than traditional savings accounts. As long as you’re banking with an FDIC-insured institution, any money you deposit in a HYSA is protected up to the $250,000 limit across the same ownership category. For example, if a person is the only owner of two HYSAs at the same institution with no named beneficiaries, those balances would be added together under the “Single” FDIC ownership category – and would be fully insured if the sum was no greater than $250,000. It’s important to note that FDIC insurance applies to traditional deposit accounts, like checking, savings, money markets, and certificates of deposit (CDs), and certain retirement accounts. FDIC insurance does not apply to investment accounts like a brokerage account, cryptocurrency, life insurance, annuities, or the contents of a safe deposit box (even if holding currency).² If you’re unsure if your specific institution has FDIC coverage, check its website or contact a bank representative to confirm.