Disclaimer: I am not a lawyer. I am
only publishing my interpretation of my situation. You should seek your
own legal representation for your own particular
situation. Do not rely on my
opinions or statements for your own purposes as state
and local law varies as do individual circumstances.
In the latest round of U.S. bank failures, the Federal
Deposit Insurance Corporation (FDIC) took over MagnetBank of
Salt Lake City this past Friday. Two other banks failed as well,
but the FDIC was only unable to find another bank willing to
take over for MagnetBank. As such, the FDIC will mail checks on
Monday to account holders for their secured deposits. This
sounds great for accounts that were below the insurance limit
(too bad for those accounts that were over the insured limit),
but there is a big down side to this. What do those insured
people do until they get the check in the mail? In my situation,
if my bank was taken over by the FDIC and they ended up having
to mail me a check the following Monday, there would still be a
lot of consequences.
First, I had better have
some money in my wallet to tide me over until I receive that
check and cash that check. There is also the question as to
whether or not I will get cash for that check or be required to
deposit that money into another bank. If it is a large amount of
money, cashing the check is probably not a viable option. I
should instead deposit the check into another bank account. If I
deposit the check into a new account at a new bank, how soon
will that money be available for withdrawal? I know sometimes my
bank requires a few days in order to clear a check and make it
available for withdrawal. Of course, these checks are from the
FDIC; but banks do need some system for verifying that a check
is actually from the FDIC and not a fake check. If the amount of
the check is such that I can cash it, where am I going to cash
it? I can cash it at another bank or the grocery store
(perhaps), but I will probably have to pay a check cashing fee
since I would not have an account at these places. Depending on
the place, this fee could be pricey.
Next, I rely heavily on
my checking account for electronic and automatic bill paying and
electronic deposits. All of these will have to be updated for a
new account at a new bank. This would include my paycheck, my
utilities, my insurance, my credit card bills, my rent checks
(what used to be mortgage payments), my student loan payments
and so on and so forth. I would have to open a new account
quickly, deposit money and then start updating all of those
accounts - especially my paycheck.
And consider this, what
if all of my automatic bill payments fail and those accounts
start charging me fees for failed withdrawals, like for
insufficient funds? Depending on the account, those fees could
be pretty hefty and start to add up fast. With this in mind, I
will need to contact all of these accounts (most of them are
setup on the Internet so I should be able to log in pretty
quickly and update the information) and stop any withdrawals
from coming out of the old checking account.
A failed bank, even if
the funds are insured by the FDIC, can mean a lot of headaches
and problems. I hope the account holders at MagnetBank in Salt
Lake City are able to avoid a lot of these such problems. For
me, I am going to start keeping a little extra cash in my
wallet.
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