Clark Howard: Bank Failure Guide

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Bank Failure Guide

The collapse of Wachovia and Washington Mutual — formerly the fourth and sixth largest banks in the United States, respectively — has upset a lot of people. Here’s what you need to know if you were a customer of either bank.

First off, take a deep breath and relax. You can access your funds just as you did before the turmoil. With the FDIC limits being raised to $250,000, your accounts are completely safe if you stay well within that range. If you’re pushing the $250,000 limit in any one bank, why not spread your money out among a few different institutions? Use CDARS.com to help if you are a Daddy Warbucks with money to insure up to $50 million.

Meanwhile, if you have a mortgage or HELOC with Wachovia or WaMu, you still must pay on your debt to the same address where you’ve been paying all along. Fortunately, the interest rate can not be changed when the bank fails. But here’s an important caveat: Be sure to keep hard copies of the balance due on your mortgage or HELOC. Having current records is your best defense against things getting bungled down the road as other banks start running these failing institutions.

The only “gotcha” here pertains to CDs. Say you opened a 12-month CD at the rate of 4% APY last year at either Wachovia or WaMu. The acquiring bank must decide whether to honor that rate or reduce it. Only time will tell.

In summation, where is it safe to put your money? Clark wants to emphasize that it’s completely safe to use all of our nation’s banks, mutual fund companies and credit unions.

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