How the FDIC Affects Your Wallet

You might be surprised to learn that the FDIC is not funded by tax payer revenue, so it receives no Congressional appropriations. Rather, it’s funded by premiums that banks and thrift institutions pay for deposit insurance coverage and from earnings on investments in U.S. Treasury securities. With an insurance fund totaling more than $45 billion, the FDIC insures more than $5 trillion of deposits in U.S. banks and thrifts – deposits in virtually every bank and thrift in the country.

Banks and thrift institutions have to comply with a host of regulations and safe operating guidelines designed to protect depositors and their money. In many ways, the FDIC could be considered a consumer protection agency as it supervises and regularly examines insured banks to make certain they are operating in safe and sound ways, thus protecting customers and their deposits.

On October 3, 2008, FDIC deposit insurance temporarily increased to $250,000 per depositor through December 31, 2009, but there is legislation currently proposed in Washington to keep the $250,000 coverage permanent. Many experts believe this will pass with little resistance, but only time will tell.

Your money in savings, checking and other deposit accounts, when combined, is generally insured to $250,000 per depositor in each bank or thrift the FDIC insures. Deposits held in different categories of ownership – such as single or joint accounts – may be separately insured. Also, the FDIC generally provides separate coverage for retirement accounts, such as individual retirement accounts (IRAs) and Keoghs, insured up to $250,000. The FDIC’s Electronic Deposit Insurance Estimator can help you determine if you have adequate deposit insurance for your accounts. We’ll cover ownership categories in more detail in our next installment.

read more...

The FDIC, Your Bank, and You

We’re launching our blog with a short series of posts dedicated to how we work with the Federal Deposit Insurance Corporation, or FDIC, to protect your hard-earned cash. (With bank failures and economic doom-and-gloom all over the news we thought it a good place to start.) But before we get into specifics, we need to provide a brief history of the FDIC and its role as a consumer protector.

The FDIC was created as an independent agency of the federal government in 1933 in response to the bank failures of the 1920’s and early 1930’s. The FDIC is headquartered in Washington, D.C., but conducts its business in Utah from a field office in Salt Lake City. This field office works closely with the Utah State Department of Financial Institutions to oversee the safety and soundness of many of the state’s banks, including Western Community Bank. Since the start of the insurance program on January 1, 1934, no depositor has lost a single cent of FDIC-insured funds from a bank failure.

The FDIC insures deposits only. It does not insure securities, mutual funds or similar types of investments that banks and thrift institutions may offer. (See Insured and Uninsured Investments on the FDIC website to determine what is and is not protected by FDIC insurance.)

Upcoming installments will cover “How the FDIC Affects Your Wallet,” “How to Make the Most of FDIC Insurance Coverage” and “How the FDIC Affect’s Your Bank’s Service.” We hope these posts will help you gain a better understanding of how you can better protect your hard-earned cash, and how your bank is working to protect you.

read more...

Make the Most of FDIC Insurance

Our last post made reference to the FDIC’s Electronic Deposit Insurance Estimator, or EDIE, to help you determine if you have adequate deposit insurance for your accounts. Today we’ll delve further into ways you can make the most of available FDIC deposit insurance coverage.

Perhaps one of the best features of FDIC deposit insurance is that’s free. You qualify for it simply by opening a qualified deposit account at an FDIC insured bank. How much insurance you can receive is a different matter. The amount of coverage is based on factors such as the amount of money you have in an insured bank, the type of account, and the kind of ownership category the account falls into.

You can never receive more money than you have in your deposit account. Traditionally, the FDIC has insured deposits up to $100,000 per depositor, but on October 3, 2008, FDIC deposit insurance temporarily increased to $250,000 per depositor through December 31, 2009. So this means if you and your family have $250,000 or less in all of your deposit accounts at the same insured bank or savings association, you do not need to worry about your insurance coverage – your deposits are fully insured. A depositor can have more than $250,000 at one insured bank or savings association and still be fully insured provided the accounts meet certain requirements

You may qualify for more coverage if you own deposit accounts in different ownership categories. The best source of information regarding ownership categories is the FDIC. So to help you determine how you can establish your accounts in the proper ownership categories and to help you maximize your coverage, we suggest you take some time to review the information on the FDIC’s insurance coverage info page.

Was this post helpful? Please leave us a comment below and tell us what you think of our blog, or to request information on another subject.

read more...

The Princess and the Penny

Do you remember the story of the Princess and the Pea where a pea is placed below a ridiculous stack of mattresses to help a desperate prince determine if a traveler claiming to be a princess really is a princess? The prince thought if the woman could feel a pea through all those mattresses that she had to be a princess, because “only a princess could have skin so delicate” as to feel that small irritating pea under all of those mattresses. Sure enough, the woman proved to be a princess. She did not sleep all night because she could feel the tiny irritant under all the mattresses. Imagine what she would think today sleeping on one mattress with a penny-or a stash of money-stuffed under it.

Admittedly, this story is recalled in order to make a point: As bad as the economy is, or may get, the mattress is not the smartest way to save. If you don’t want to loose sleep over the safety of your money, or sleep with an annoying lump in your bed, do some homework and find a safe and secure bank where you can open a simple savings account. You will have greater peace of mind knowing your money is FDIC insured and that your bank is working hard to deserve your trust.

Remember that the bank failures you’re hearing about in the news are typically large banks, and that there are thousands of smaller institutions, like community banks, that continue to operate in safe and sound ways. What’s more, your local community bank is most likely owned, managed, and operated by people in your community who understand your needs, the local economy, and the issues that affect your neighborhood.

Resist the temptation to open a “restless-nights-sleep account” and open a simple savings account at a trusted local community bank instead. You’ll sleep better.

Was this post helpful? Please leave us a comment below and tell us what you think of our blog, or to request information on another subject.

read more...

Benefits of “Going Local”

“The past few years have seen increased emphasis on “going local,” or supporting local communities by consuming products that are produced and sold by independent organizations rather than big-box, franchised retailers,” according to American Fork City Councilman, Dale Gunther in an article published in the February 2009 Utah County Business Journal. “The trend has really taken off…because it helps local communities thrive by reinvesting local dollars at home.”

“While it’s natural to think of products such as produce and art as part of the “going local” movement,” Gunther continues, “one product that is often overlooked is the community bank. Yes, the community bank is indeed a local product that supports local communities.”

So what are some benefits to banking with a local community bank? Here are a few cited by Mr. Gunther:

• “Community banks are locally owned and geographically centralized. This means the money deposited by citizens in your town is generally loaned back to citizens in your town” – not citizens or businesses in other states or even counties.
• “Local management also means faster decision making and less red tape.”
• “At community banks, there are fewer layers to get to the top, which means you have easier access to executives.”
• The employees of community banks are almost always from the community. They “know the community and have been working at the bank long enough to know how to best meet the needs of the community. They know the market and have a vested interest in seeing the local economy succeed.”
• Smaller banks are better to work with you when you have problems with your account. “[They] work with you to avoid fees in the first place and, when incurred, they don’t sting as much as those of their bigger brethren.”

When you consider “going local,” do as Mr. Gunther suggests and “realize that as much as spending locally lifts communities, saving and borrowing locally does, too,”

Was this post helpful? Please leave us a comment below and tell us what you think of our blog, or to request information on another subject.

read more...

Half-empty or Half-full?

The US Department of Labor released a report today stating that the national unemployment rate rose to 8.5% in March 2009 — the highest level since 1983. At the risk of sounding a little heartless: So what? What does this often quoted statistic mean to me and you? It’s 8.5% of what? How does Utah, or Utah County, or Orem, Lindon, Pleasant Grove, or American Fork fit into this statistic? These are all good questions that deserve some attention. So here goes…

The unemployment rate is a measure of the percentage of the work force that is unemployed at any given date–which means that 91.5% of the work force is still employed according to the March 2009 numbers.

How does this affect us locally? For simplicity’s sake, let’s take a look at February’s statistics, because we have them for the nation and state. In February 2009, the US unemployment rate (or sometimes called jobless rate) was 8.1%, which means that the 91.9% of the workforce who wanted to be employed had a job. The rate for the same period in Utah was 5.1% (or 94.9% employed). This puts Utah at number six on the list behind Wyoming (3.9%), Nebraska, North Dakota, South Dakota, and Iowa (4.9%) out of the 50 states and Washington D.C. In the Provo-Orem and Salt Lake City Metropolitan Statistical Areas, the rate was 5.2%. This places our local rate at 27 on a list of 372 other Metropolitan Statistical Areas.

We all know we’re in turbulent economic times, but in our neck of the woods we’re not being impacted as heavily as other areas of the country, and we’re not getting through it unscathed, either. Have we seen the worst of it? Probably not. Is the glass half-empty? No. There is still plenty to be thankful for, because it surely could be a lot worse for many more people.

Chances are high that you know someone who has been laid-off or needs a job. Do them a favor by keeping your ears and eyes open for opportunities, and let them know about what you see or hear. History tells us that communities that work together are usually better insulated against downturns as each member helps his or her fellow citizens. The situation will get better. At a recent event I attended, Steve Forbes, the Chairman and CEO of Forbes, Inc., and Editor-in-Chief of Forbes Magazine, said, “The world can only end once–and this is not it.”

Was this post helpful? Please leave us a comment and tell us what you think of this post, our blog, or to request information on another subject.

read more...

Tax Fun Facts

Is it really fair to place the words “tax” and “fun” next to each other? We’ll let you decide, but with April 15^th bearing down on us, here are some interesting–if not fun–tax facts to divert your thoughts for a few minutes and hopefully lift your spirits.

• The first property tax in the United States was in 1798.
• The first US income tax started during in the Civil War to help raise money back in 1862.
• The first federal tax office in the US was the Office of the Commissioner of Internal Revenue in 1862.
• The 16th Amendment, ratified in 1913, established the first permanent US income tax. Four states rejected the amendment: Connecticut, Florida, Rhode Island, and Utah, and two never considered/discussed it: Pennsylvania, Virginia.
• The Gettysburg address, one of the greatest speeches in U.S. history, has 269 words. The Declaration of Independence contains 1,337 words. The Holy Bible consists of 773,000 words. Yet there are over 7,000,000 (not a typo that is 7 million) words in the U.S. Tax Code (laws and regulations).
• There were 402 tax forms in 1990, by 2002 that number jumped to a staggering 526.
• The number of pages in the tax code and regulations went from 26,300 in 1984 to an astonishing 54,846 in 2003. There are 500 pages in a ream (standard package) of paper–that’s nearly 110 reams of paper! A ream is about two inces thick, so if you stacked all 54,846 pages on top of each other, you would have a stack of paper 220 inches high, or about 18 feet tall!!
• The IRS sends out over 8 billion pages in forms and instructions every single year, that’s nearly 300,000 trees. (Thankfully, they now use recycled paper).
• The easiest form, the 1040EZ, has 33 pages of instructions–ridiculous.

Was this post helpful? Please leave us a comment and tell us what you think of this post, our blog, or to request information on another subject.

read more...