You may have gotten a notice from your bank recently stating something like “Effective January 1, 2010 Your Bank will no longer be participating in the FDIC Transaction Account Guarantee Program.” Citibank is opting out, along with over 1,000 other banks (complete list).
What is the Transaction Account Guarantee (TAG) Program? In response to the financial crisis, the program basically allowed participating banks with all noninterest-bearing transaction accounts – like many checking accounts that earned no interest – to have unlimited coverage by the FDIC. It was part of the Temporary Liquidity Guarantee Program, and was designed to help calm the fears of depositors with lots of money in possibly shaky banks.
Now that some banks are feeling better about themselves, they decided that they’d rather save the money and not participate in the extension through June 30, 2010. According to Bloomberg, the cost of participation will increase to a range of 15 cents to 25 cents annually for every $100 of covered deposits, up from 10 cents currently.
But for most people this shouldn’t be a concern, as you’ll just revert back to the standard $250,000 per depositor covered by FDIC, currently set to last until December 31, 2013. I would hope if you had over $250,000 in cash, it wouldn’t be sitting in a non-interest bearing account!