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Jul 18, 2008 10:31 am US/Pacific

Deposit Interest Covered By FDIC?

QUESTION:  Hi, my name is Mark Hall and one of the hot stories tonight was about the BANK RUN and that most people were covered by FDIC guarantees up to 100k. I've heard that only the deposits are covered, and not the interest earned. That could make a big difference on how to handle your accounts. Also, some people may not be covered for part of their investment income without knowing it until it's too late.  Is it true that interest earned over the years isn't covered?

ANSWER: The fact that the FDIC has had to take over Indymac bank recently, has caused many people to review their own accounts for proper coverage.  FDIC insurance can go well above the $100,000 threshold, if the accounts are titled correctly.  The $100,000 figure applies to the per person coverage that an account is insured for.  For example, accounts registered in Joint Tenancy is covered up to $200,000, and that includes principle and interest. 

The important point here is to make sure to include the interest that you will be earning to determine the proper deposit that will insure full FDIC coverage.  So in short, the answer to your question is yes, FDIC does cover interest if it is within the insured amount of your account.  For a comprehensive overview of ways to maximize your FDIC coverage you can go to the following link at http://www.fdic.gov/deposit/deposits/insured/index.html.

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Money Matters is provided by:

David Schauer, CFA, MSFA, CFP®
Financial Planner
Hanson McClain
E-mail questions to moneymatters@kovr.com


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