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Important Update: Changes in FDIC Deposit Insurance Coverage

The FDIC deposit insurance rules have undergone a series of changes starting in the fall of 2008. As a result, certain previously published information related to FDIC insurance coverage may not reflect the current rules. For details about the changes, visit Changes in FDIC Deposit Insurance Coverage. For more information about FDIC insurance, go to www.fdic.gov/deposit/deposits/index.html or call toll-free 1-877-ASK-FDIC (1-877-275-3342). For the hearing-impaired, the number is 1-800-925-4618.

Special 10th Anniversary Edition - Fall 2003

Long-Distance Banking: Your Rights and Risks
Answers to questions about Internet banks and other institutions without a local office

What are the potential advantages of banking long-distance?
Banks that rely heavily on the Internet, toll-free call centers and other low-cost ways to serve customers nationwide may be able to pay higher returns on deposits or charge lower rates on loans. Michael Benardo, manager of the FDIC's electronic banking section, adds that banking over the Web, in particular, offers convenience. "You can do your banking from home, 24 hours a day, seven days a week," he says.

What are the possible disadvantages?
You can't sit down with a bank employee face-to-face if you need to solve problems. You're likely to have to rely on the mail to make deposits and conduct other business. You'll have to use ATMs to get cash. Also, because some institutions that advertise in publications or on the Internet may turn out to be fraudulent, check with federal regulators before providing confidential information or sending money.

If I bank by telephone or the Internet, are my legal protections the same as when I bank in person?
Yes. In addition, you're protected by the Electronic Fund Transfer Act, which governs consumer rights involving errors in the handling of electronic deposits, payments or withdrawals, and limits on consumer liability for unauthorized transfers.

How are deposits at Internet banks insured?
The basic FDIC insurance amount applies to each separately chartered bank or savings association. If an Internet bank is a division of a traditional brick-and-mortar bank, not an independently chartered entity, deposits in both the Internet bank and the parent bank are combined for insurance purposes. Determining whether an Internet institution has its own charter can be complicated, so contact the FDIC if you have questions.

How can I be confident that my banking transactions over the Internet are secure?
Make sure the bank's Web site describes its security procedures. Most banks use "encryption" to scramble private information to prevent unauthorized access. Take your own precautions by protecting passwords and personal identification numbers (PINs). Also, never send a bank or anyone else an e-mail with personal information, such as your bank account, credit card or Social Security number, unless the e-mail is encrypted.

Excerpted from "Long-Distance Banking: A Guide to Your Rights and Risks," Spring 2002.

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Last Updated 12/12/2003 communications@fdic.gov