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FDIC Limit of 100K or 250K - Who Cares?


The more I listen to Obama, McCain, and the Senate talk about how increasing the insurance ceiling to $250,000 will in some magical way help with the financial crisis we are experiencing, the more I want to seriously vomit. I’m not saying it’s necessarily a bad thing to raise the Federal Deposit Insurance Corporation (FDIC) limit. It hasn’t been raised from $100,000 for a long time, so perhaps it’s time.

But why can’t people just see through the smoke and realize that this is purely a political move? They are clearly using it as a way to gain more support for the bailout plan while they pat themselves on the back for caring so much about helping out the American public.

What's Really Going On?

Ask a smart friend who truly understands financial markets and institutions, and they will likely tell you that the increase will have little or no effect on the failing credit markets we are dealing with now. Yes, some small businesses and individuals may feel better about putting their cash in the bank, but if they are rational investors they will already have their money spread out across various banks or accounts within the same bank.

The cost of protecting yourself at $100,000 is so low and so easy to do, why wouldn’t you? The fact is less than 2 percent of the American population makes more than $250,000 per year, and according to the U.S. Department of Commerce, the personal savings rate is hovering just under 3 percent of “disposable personal income.”

So, for those who have saved enough cash and desire to park it all at the local bank in their checking account, get prepared to do a little celebration jig. For the vast majority of the population that doesn't – or who have their money in online investment and savings accounts -  I suggest you look past the political smoke and focus on the real issues at hand.

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Joshua Heckathorn's picture

Joshua Heckathorn was President of Creditnet, is a credit expert and has been featured on CNNMoney, FOX Business, Yahoo Finance, The Street, and many other national publications during the past ten years.  He received a Bachelor of Science in Management (Finance) from Brigham Young University's Marriott School of Business and earned his MBA from Seattle University.

Visit 's Google Plus profile for more.


JoBama's picture

Actually, I work in the investment field. I would say 90% of my clients are happy about this increase and will benefit directly. My average client is retired, making $20K-$50K a year when working; and has saved OVER $100K.

The average SHMO has more then $100K saved. So if you dont, consider yourself (SCREWED) when the GREATER depression get's here.

Joshua Heckathorn's picture

Thanks for your comment JoBama. I'm glad to hear the majority of your clients are happy with the change. I didn't say it was a bad thing at all. In fact, I'm pleased with the change as well!

My point was that unlike what politicians would have the general public believe, the change will really have little effect on the overall state of the economy and the credit markets. And for those of us who do have more than $100K saved, in addition to our other retirement investments, it has always been easy to insure the cash and spread it across multiple accounts or banks. Who wants to leave it all in the same place anyway?