Here are things to keep in mind if the bank you do business with is merging:
You have a six-month grace period to restructure accounts if necessary. Under FDIC rules, for at least six months after the merger your “transferred” deposits will be separately insured from any accounts you may already have had at the assuming bank. “This grace period gives a depositor the opportunity to restructure his or her accounts, if necessary,” explained Martin Becker, Chief of the FDIC’s Deposit Insurance Section. “This is useful when a depositor holds funds at each of the two banks prior to the merger, each in the same ownership category, and now the combination of funds after the merger exceeds $250,000.”
The basic FDIC insurance amount is $250,000 for each depositor at each bank. So if you have money in two banks that merge into one, as long as your combined total (including accrued interest) is $250,000 or less, all your money is fully protected.
But even if the merger results in you having more than $250,000 in the combined banks, you may still be fully insured. First, remember that deposits you hold at a bank in different “ownership categories” — such as joint, single and retirement accounts — are separately insured to at least $250,000. That means, for example, that after the merger you could have up to $250,000 in single accounts and up to $250,000 in your share of joint accounts and still be fully insured.
If you have questions about your deposit insurance, call the FDIC at 1-877-ASK-FDIC and ask to speak to a deposit insurance specialist.
The loans you have at your old bank generally will not be affected. That’s because a loan is a binding contract between you and the lender. So, you are still obligated to make payments according to the loan agreement. Also, a fixed rate on a mortgage or car loan will remain the same.
There may be changes for existing deposit accounts and credit cards. Financial institutions can generally change the interest rate or certain other terms of deposit accounts and credit cards if they provide advance notice to customers and the account contract permits the change.
“Customers should always promptly review all correspondence from their institution, but this is particularly important when you become a customer of a different bank after a merger or a bank failure,” said Luke W. Reynolds, Chief of the FDIC’s Outreach and Program Development Section. “You wouldn’t want to miss a notice from the new institution that it was reducing the interest rate on a CD or it has a different address for you to send loan payments.”
If you are doing business with a new bank that acquired your accounts from a bank that failed (i.e., not because of the merger of two open institutions), different rules apply for deposit accounts. Although the acquiring bank has taken the failed bank’s deposit accounts, the original contract with the failed bank no longer exists. So, the new bank will create a new deposit contract, perhaps with a lower interest rate. Rates on certificates of deposit (CDs) may also be changed. In this case, the failed bank’s customers can withdraw their money without an early withdrawal penalty.
Think about whether you and the new bank are a good fit. As Reynolds noted, “A merger can be a good opportunity to look at the fees and interest rates for your accounts and compare them to what is offered by a few competitors, so you can ensure you are getting a good deal.”