How Safe Is a Checking Account?

By Kelly Boyer Sagert · April 07, 2022 · 5 minute read

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How Safe Is a Checking Account?

You may wonder how safe a checking account is in terms of stashing cash, and we’d like to reassure you right off the bat that it is quite safe. Banks are a whole lot better for protecting your hard-earned dough than keeping a wad of bills hidden somewhere in your home.

But there’s more to the story. So read on, and we’ll tell you in detail how banks make sure your money is well defended. We’ll also spell out your role in protecting your moolah — the moves you can make to keep those dollars safe.

Is My Money Safer at a Bank?

If you’re wondering, “Is my money safer at a bank,” the short answer is definitely yes. For one thing, carrying cash with you or hiding it in your house leaves you vulnerable to theft or loss. These things happen every day in towns across the country so it pays (literally) to keep your moolah in a bank.

Then, there are four more reasons why your money is safer in the bank that we’ll explore next.

Why Your Money Is Safer in the Bank

Are checking accounts safe at a bank? Indeed they are! Reasons why include the following:

•   FDIC insurance

•   NCUA insurance

•   Capital requirements

•   Protection from fires, floods, and thefts

Let’s explain these in a little more detail, so you realize just why a bank is best.

FDIC Insurance

The Federal Deposit Insurance Corporation (FDIC) protects people who deposit money into FDIC-insured financial institutions against loss. This kind of insurance is backed by the federal government and depositors are automatically insured up to $250,000 per depositor, per FDIC-insured institution, per category. If your bank were to go out of business, you’re covered (phew!).

NCUA Insurance

Maybe you’re the kind of person who prefers to keep your cash at a credit union. Don’t worry; it’s still safe. Congress created the National Credit Union Administration (NCUA) in 1970 to insure deposits of up to $250,000 at federally insured credit unions. The $250,000 is for each member, per insured credit union, per category. Basically, NCUA is an agency that provides coverage for credit union members that’s comparable to what FDIC does for bank customers.

Capital Requirements

Banks and other financial institutions that accept deposits must have enough liquid assets to cover their expenses while still being able to provide cash when depositors request withdrawals. Formulas to calculate capital requirements can be complicated, but know that they are in place and are protecting you. A financial institution is required to have a risk-to-asset ratio of at least 4% to safeguard people who deposit funds into their institution.

Protections from Fires, Floods, and Thefts

Banks purchase banker blanket bonds, which protect the institution in case of fire, flood, robbery, embezzlement, earthquakes, and other causes of lost funds. As a result, even if the bank loses money, customers won’t lose their funds.

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Advantages of Keeping Money in a Checking Account

Now, let’s pull back and take a big-picture look at why a checking account is such a sweet spot for protecting your money. Some of the pluses:

•   Your money is covered from loss when deposited in an FDIC-insured bank or an NCUA-insured credit union.

•   If your funds exceed the amount of these significant coverages ($250,000), then you can simply open accounts at another insured bank and be covered.

•   Interest-bearing checking accounts (though not all checking accounts do pay interest) allow you to earn money simply by keeping it in the account.

•   You can easily use your deposited funds by writing a check, withdrawing money from the bank or by an ATM, or transferring it.

•   Checking accounts that come with debit cards make it simple to make purchases through a card reader in person or by entering data online. (Note: There are cons of using a debit card online, like less fraud and purchase protection.)

•   Mobile banking makes it easy to conduct financial transactions wherever you go. You may be wondering, Is mobile banking safe? The answer is yes, most of the time, but you do need to take some precautions to avoid potential hacking activity (more on that below).

•   You can have your paycheck automatically/directly deposited into your checking account. This eliminates a paper check that could get lost or stolen; plus, you don’t have to physically deposit it yourself on payday.

•   A checking account can provide a record of what you spent — and when and where — which is helpful with budgeting, at tax time, and more.

•   Some banks allow you to get paid up to two days early — meaning that your direct deposit is available 48 hours before it’s actually deposited.

Your Role in Protecting Your Money in the Bank

You’ve learned about how banks safeguard your deposits…but what about your role in protecting your money? Yes, even when your dinero is locked up tight at a bank, your actions can impact its security. Consider the following points:

•   If you have any reason to believe that fraudulent activity is occurring or has occurred with your checking account, contact your bank immediately as well as local law enforcement.

•   Create a unique password for your checking account; consider storing it in a secure password management system. Then regularly change your password.

•   Regularly check your balance and balance your statements. This way, you can spot suspicious-looking activity early and address any discrepancies. Identity theft is not unusual and a proactive approach is the best way to protect yourself.

•   Be especially careful when using public Wi-Fi at libraries, coffee shops, and the like. While they’re convenient for information gathering, when you’re conducting financial transactions on them, the open connection makes it easier for hackers to do bad things.

•   Keep your own computer up to date, installing appropriate software updates, malware blockers, and so forth.

•   Sign up for fraud alerts with your bank. Receiving real-time transaction info through texts, emails, or mobile apps allows you to quickly respond to any attempts at fraud.

•   Also, don’t share your banking information with anyone by phone or email. For example, if someone claims to be a representative from your financial institute, hang up. Then use the contact information you have for your bank and share what happened.

The Takeaway

So, how safe are checking accounts? At insured institutions, depositors enjoy deep levels of protection. Besides being safe, there are numerous advantages to having a checking account. Definitely a win-win versus hiding your bucks somewhere at home. But depositing your funds is just part of the bargain: Then you have to do your share and keep vigilant and make sure that fraudsters don’t get their fingers on your dough.

If you’re looking for a bank that protects your money and goes several steps further, apply for an online bank account with SoFi. Yes, we’ll watch your FDIC-protected funds like a hawk, but here’s what else. If you sign up for direct deposit with us, you’ll earn 1.25% APY — which happens to be 33 times the average rate paid on checking accounts in America! Plus, you’ll pay no account fees, and you’ll be able to access your paycheck an amazing two days early.

Keep your money secure and enjoy smarter banking with SoFi.

FAQ

Is your money safe in a checking account?

Yes, your money is safe. Federally insured banks and credit unions automatically protect depositors like you for up to $250,000 per person, per insured institution, per account category. These financial institutions are even covered in case of fire, flood, and earthquakes, as well as when crimes, such as robbery and embezzlement, occur.

What are the risks of a checking account?

Checking accounts come with plenty of benefits and, at federally insured financial institutions, with solid protection against risk. That said, there are a couple of potential disadvantages to checking accounts. For example, not all of them pay interest (although some do). Some come with monthly fees (which can get pretty pricey). And some financial institutions will require a minimum balance in your account. There’s also always some risk of criminal activity: If you ever suspect that someone has hacked into or otherwise fraudulently used your checking account, contact your bank and local law enforcement.

Can someone steal your checking account?

Physical checks and debit cards can be stolen, yes. So keep them in a secure place and, if any are lost, contact your financial institution immediately. If you believe them to be stolen, also inform your local law enforcement. What’s more, hackers can use their digital smarts to obtain enough information to get into your account, so report any problems immediately.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2022 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
SoFi members with direct deposit can earn up to 1.25% annual percentage yield (APY) interest on all account balances in their Checking and Savings accounts (including Vaults). Members without direct deposit will earn 0.70% APY on all account balances in their Checking and Savings accounts (including Vaults). Interest rates are variable and subject to change at any time. Rate of 1.25% APY is current as of 4/5/2022. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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