Ask Money

CDs and the FDIC

Chris Farrell Sep 29, 2008

Question: I understand that CD’s are FDIC insured, but what about the interest on them?

Are you guaranteed just the principal amount or the principal plus interest, too? Mary, Waukesha, WI

Answer: The basic insurance amount is $100,000 per depositor, per insured bank, and that includes principal and accrued interest up to a total of $100,000.

When a bank fails, here’s what the FDIC has to say in more detail about the effect on accrued interest.

The FDIC’s insurance coverage includes principal and interest through the date of the bank failure up to applicable insurance limit for each deposit. The accrual of interest ceases on all accounts once the bank is closed. If an open bank acquires deposits from the failed bank, the acquiring bank becomes responsible for re-establishing interest rates and beginning the accrual of interest after the date of the failure of the bank. The acquiring bank may change the interest rate on the acquired deposits, but the depositor may withdraw their insured funds without penalty if they chose to do so. If no acquiring bank is found for the deposits and the FDIC pays the depositors directly for their insured amounts, interest does not accrue past the date of failure.

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