Are Your Bank Deposits Safe? Bank Runs, Uninsured Deposits and the $250,000 FDIC Limit

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An article listed the banks with the highest percentage of uninsured deposits, and it got me thinking about what a bank run actually means for regular people. Most of us aren't sitting on $2 million, so the FDIC limit isn't the real issue — but the reason those banks are shaky is worth understanding.

In this Dollar Is Dead episode I walk through how banks work, why commercial real estate and rising credit card delinquencies matter, and what I'd do with cash I don't need in the near term.

What you'll learn

• What a bank run is, in plain English
• How FDIC insurance works and where the $250,000 line sits
• Why some banks show huge percentages of uninsured deposits
• How commercial real estate and credit card delinquencies pressure banks
• What I do instead of holding a big pile of dollars

What a bank run actually is

Say there's one community bank. People in that town deposit a total of $10 million. The bank doesn't sit on that $10 million — it loans money out and does other things with it. So if everyone showed up on the same day and said "give us our money back," the bank couldn't do it. That's a bank run. It doesn't happen often, but it happened to a big bank within the last couple of years. That bank went under and its assets were sold to another bank.

Where FDIC insurance stops

If your bank is federally insured, deposits up to $250,000 are covered. Checking and savings accounts usually are — just make sure the bank is actually federally insured. The question the article raises is what happens to money over that line. Someone with $2 million in one account has most of it uninsured. There are ways around that, like opening multiple accounts at different banks, but plenty of people don't bother.

Why the list matters

The list I show ranks banks by what percentage of their deposits are not insured. It starts at 100% at the top and goes down from there. That's a lot. If the people holding that uninsured money believe bad times are coming, or believe their particular bank has a problem, they can ask for it back or move it somewhere else. Enough of them do that at once and you've got a run.

Commercial real estate and delinquencies

I think personal real estate is in a bubble — prices got inflated by government money and low interest rates. But from what I've read, commercial real estate is in a far more dire situation. So many people went home during the pandemic and stayed home. Office buildings sit less occupied, owners can't cover their bills, values drop, and some owners just walk away and hand the building back to the bank. Some banks have huge exposure to those commercial loans. Add rising credit card delinquencies — people not paying — and banks start writing things off. That's when depositors get nervous, and nervous depositors are how a run starts.

What I'd do instead

Keep dollars for your emergency fund and your immediate bills. Beyond that, look at what wealthy people actually own: real estate, gold and silver, equities, index funds like an S&P 500 fund, crypto. Those aren't dollars. They can go up even while the dollar loses value to inflation. The odds of your specific bank failing are low and your money should be insured anyway — but wouldn't you rather not deal with it at all? Look up where your bank sits, consider spreading money across multiple banks, or convert some of it into something else if you don't need it in the near term.

Key steps

1. Confirm your bank is federally insured.
2. Check whether any single account is over the $250,000 insured limit.
3. Look up your bank on a list showing uninsured deposit percentages.
4. Keep dollars for your emergency fund and near-term bills — no more than that.
5. Spread larger balances across multiple banks, or move money you don't need soon into assets.
6. Keep attacking high-interest debt in the meantime with the credit card payoff calculator.

FAQ

Is my money safe if my bank fails?

If the bank is federally insured, deposits up to $250,000 are covered. The risk sits with money above that line. If you have more than the limit at one bank, you can spread it across multiple accounts or multiple banks. See savings vs. paying off debt for how to decide where that cash should go.

Should I pull all my money out of the bank?

No. You need dollars for your emergency fund and your bills — that money belongs in a checking or savings account where you can reach it. The point is not keeping a large, idle pile of cash sitting in one place. Start with how much emergency fund you actually need.

What should I hold instead of extra cash?

Wealthy people own real estate, gold and silver, equities, index funds and crypto rather than piles of dollars. Those can rise while the dollar loses value. If you're still carrying high-interest debt, though, paying that down is usually the better move first — run it with the Avalanche Debt Eliminator and read buying gold while in debt.