INSURING ONLINE BANK SAFETY
Dear John: I have Certificates of Deposit maturing very shortly. I went to BankRate.com and found the two highest annual yields – each over 4 percent – were offered by banks with the site’s lowest rating or no rating at all.
I understand each bank’s CDs would be insured by the Federal Deposit Insurance Corp. Is there any reason not to go into a CD with an FDIC-insured bank with a low rating? If a bank went belly up, how long would it take to collect on FDIC insurance after the CD matured? T.O.
Dear T.O.: If the bank is FDIC insured you are covered. That’s the bottom line. But don’t necessarily take the bank’s word on that.
“Today it’s easy to create a Web site and make certain claims,” says an FDIC spokesman. So don’t trust any bank’s offer unless you check it out by going to FDIC.gov and click on the “bank find” button.
What if one of these high-paying banks fails? “If the bank fails, the FDIC will come in and find a healthy bank to take it over,” the spokesman says. The deal will be seamless and will happen overnight. So you’ll have access to your money the next banking day.
“In the rare case we cannot find a buyer, the bank will be closed on Friday. And on Monday we will be mailing checks to customers,” the FDIC said. There are two things you should watch out for.
First, that the bank you look up on the FDIC site is the correct one. Lots of banks have similar sounding names and some intentionally make the name sound legit. Second, FDIC insurance covers up to $100,000. So don’t go over the limit in any one account or you won’t be insured – no matter what bank it is.
But there are ways around that – mostly by putting the accounts in a variety of names
Dear John: I am surprised you have not addressed the auction-rate securities debacle. I own these securities which my broker admits were sold as cash management alternatives and which appear on my statement as such.
At present these securities cannot be redeemed and have been revalued lower. Why do the National Association of Securities Dealers and the Securities & Exchange Commission seem to not care about the brokerage firm’s fraudulent misrepresentation of the investment? K.R.
Dear K.R.: I think enough people complained about these investments and now the SEC and the Financial Industry Regulatory Authority are looking into how the products were marketed.
SEC spokesman John Heine said his agency was working with Finra to look into “representations made to investors when they purchased auction-rate securities.”
Good luck. This could take a while unless the financial markets suddenly go back to being their old selves.
Send your questions to Dear John, The N.Y. Post, 1211 Ave. of the Americas, N.Y., N.Y., 10036, or [email protected].