While benefits of FDIC insurance can be debated, especially in this economic climate, insurance on certificates of deposit (CD) and bank accounts provides needed relief to the individual investor. Created in 1933 in response to the bank losses suffered during the Great Depression, FDIC insurance guarantees individuals’ bank deposits, currently up to $250,000 for each deposit in a single bank. Today, an individual can use the insurance to buy a CD knowing that their money is protected up to $250,000 until December 2013.
In addition to bank deposits, FDIC insurance carries over to some of the more conservative investment options as well. FDIC-insured CDs are a great alternative to low-interest-rate savings accounts. CDs are easy to open and produce a higher rate of return, usually much better than an everyday savings account.
Those looking to give up FDIC insurance in exchange for typically higher interest rates—without getting into higher-risk investments—might also consider senior notes. While not insured by the FDIC, senior notes historically have less risk than other types of unsecured debt because in the event that the issuer goes bankrupt, holders of these investments are generally paid before any other creditors.
Despite the current economic situation, there are ways to invest that will keep your risk low. Zions Direct offers one of the most popular FDIC-insured CD auction platforms, and, as mentioned in April’s Wall Street Journal article, investor usage in this platform has continued to “accelerate as the recession continues to affect consumers’ investment decisions.” Zions Direct has also recently sold Senior Notes on its auction platform as well, giving investors an easy, transparent way to get investing.
