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FDIC Consumer News - Winter 2016

Dear FDIC: Questions About Deposit Insurance and Online Banking

En Español

It appears that some FDIC-insured financial institutions pay higher interest rates on deposit accounts that are opened online.  I would like to take advantage of these interest rates, but I have never banked online.  Can an online account be FDIC-insured? If so, would FDIC insurance help me if there is a theft or other problem with an online transaction?

Most banks offer deposit accounts at their branches as well as online, and others only operate online — they have no physical offices where the public can open accounts or transact other business.  In response to your first question, deposit accounts opened online at any FDIC-insured bank will be covered up to federal limits by FDIC insurance. “Deposit insurance coverage is the same for online-only banks as for brick-and-mortar banks,” said Calvin Troup, an FDIC senior consumer affairs specialist.

The most important thing to confirm before working with an online bank is to make sure that it is a legitimate bank, and that you are not looking at a fictitious website.  A bank can have one name that it uses for its traditional operations and a different name (“trade name”) that it uses for marketing online. You can call the FDIC at the toll-free number below and ask to speak to a deposit insurance specialist who will help confirm if the online bank in question is FDIC-insured.  The FDIC’s online tool BankFind also provides useful information, such as headquarters locations and financial information, for all FDIC-insured depository institutions.

As for your second question, by law, deposit insurance only protects accounts if your insured banking institution fails.  FDIC deposit insurance does not protect accounts from a fraud or theft online (or otherwise).  However, other laws and industry practices may provide coverage from cyber theft. For information, see How Federal Laws and Industry Practices Limit Losses From Cyberattacks.

“If you have any questions about setting up an account online, be sure to get answers prior to making any deposits,” added Troup.

You can learn more about FDIC deposit insurance coverage by calling us at 1-877-ASK FDIC (1-877-275-3342) or visiting our website.  For those who are deaf or hard-of-hearing, please call 1-800-925-4618.