What is the FDIC Transaction Account Guarantee Program?

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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!

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  1. I called Chase, told the agent the Chase website mentions this on their front home page and asked what it meant.

    He said, “Uh ……”, couldn’t tell me, couldn’t find anyone in all of Chase who could tell me.

  2. The amount of people that have over 250K cash and are so stupid they keep it in a Non Interest Bearing Account make this issue remarkably irrelevant

  3. The list doesn’t include offshore U.S. territories such as Guam and Puerto Rico. Why? Even Hawaii doesn’t seem to be on the list and First Hawaiian Bank has opted out of the program too.

    You should get a complete list..not just a partial list

  4. I’m fairly new at this whole banking thing, and I currently bank with Bank of America. Everyone kept telling me that I should switch my bank because they will no longer be FDIC Insured, but on the website, it only claims that Investment & Insurance products will no longer be insured. I have a regular non-interest checking account but also a savings account that does accumulate interest (but definitely less than 250k) Should I change bank? because no one that I know can give me a clear answer.

  5. Is there anywhere a small consumer can report abuse by a bank? Compass bank has more than one charged someone I know an overdraft fee before anything overdrafted, and thus Compass bank actually created the overdraft situation. We have screen pictures of this. Is there anywhere we can go to report this and receive help?

  6. @LIZ:
    Contact the Better Business Bureau. I have dealt with the BBB twice recently and it amazing how quick companies react when the BBB gets involved.

  7. Tiffany – I would stop getting any advice from whoever told you BoA would no longer be FDIC insured. They clearly have no clue. There are no banks chartered in the United States that are not FDIC insured. Scams and banks that are chartered overseas may not be covered by the FDIC- be careful with on-line banks… you can check the FDIC’s website to see if a bank is a member bank. Also, investment and insurance products were never FDIC insured. FDIC only covers deposit accounts (checking, savings, IRA accts, CDs, and etc). You might consider changing banks for better interest rates or if you are not happy with customer service but I wouldn’t change banks simply for reasons relating to FDIC insurance.

  8. Andrew, in response to your comment “The amount of people that have over 250K cash and are so stupid they keep it in a Non Interest Bearing Account make this issue remarkably irrelevant.” My husband and I are business owners and, to put it bluntly, wealthy. We (and many other people I know) keep around $300,000 in a non-interest bearing, liquid, transaction account. We have several educated reasons for doing this, the most important being that interest bearing transaction accounts (usually) require very high minimum balances and thus are less liquid than non-interest bearing accounts. We need to keep that money as liquid as possible because we actually need to spend it down on a regular basis (and paying a hefty fee for falling below the minimum balance completely negates any interest we might have earned.) We also have tax reasons that make us not want to earn interest on the money, which I don’t have time to go into here. In short, we are most certainly NOT stupid, and this issue is most assuredly relevant.

  9. Thank you! This was helpful.

  10. I agree with Heather’s response to Andrews comment. The FDIC TAG (Transaction Account Guarantee) program are not designed for people who has more than $250K for holding purposes. They served as a temporarily holding account before the money is ready to be put to work again.

    As heather mentioned, for active Investors and High Individuals, liquidity is very important especially in the market like this where Cash is king if you want to find good deals. (whether via Business, Real Estate or other invest-able assets)

  11. Roger Wells says:

    Can some give a list of banks that do handle (TAG ACCount) Transaction Account Guarantee? .

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