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Banking

FDIC Insurance: Explained

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

FDIC stands for the Federal Deposit Insurance Corporation. The FDIC insures the money in deposit accounts up to $250,000 per ownership category. You want your bank to be FDIC-insured to guarantee the money you keep in your accounts will be available to you should the bank fail.

FDIC history

The FDIC was established in response to the Great Depression by the Glass-Steagall Act. During the time period between the Civil War and the establishment of the FDIC in 1933, bank runs were a common occurrence.

You may be familiar with bank runs from watching the movie “It’s a Wonderful Life.” Essentially, people would get scared that their deposits were going to be lost to bad investment decisions by their bank. The panic would spread quickly, and result in a rush of customers trying to liquidate their deposit accounts. The Glass-Steagall Act successfully ended these bank runs by guaranteeing that if your money wasn’t available for liquidation at your bank, your money would still be returned to you via the FDIC insurance fund.

To this end, it has been wildly successful. Coverage started at $2,500, but has grown with the times to $250,000 per ownership category. Since the FDIC was officially opened in January 1934, depositors have not lost any money from their deposits at FDIC-insured financial institutions.

NCUA vs. FDIC insurance

FDIC insurance covers deposits in banks across the country, but it does not insure deposits at credit unions. That’s why the National Credit Union Insurance Fund, administered by the National Credit Union Administration (NCUA), was established in 1970.

However, the NCUA does not insure deposits at all credit unions. Federal credit unions must be NCUA members, but state-chartered credit unions only participate if they choose to do so. You can find out if your credit union is federally insured by looking for the NCUA logo on its site or at one of its branches.

What the FDIC insurance limit covers

The FDIC insures up to $250,000 per ownership category per person within a singular financial institution. There are 14 ownership categories. While you are unable to qualify for each and every ownership category, this does allow you to qualify for more than $250,000 worth of insurance as an individual.

The ownership categories for FDIC insurance are:

  • Single accounts
  • Joint accounts
  • Revocable trust accounts
  • Irrevocable trust accounts
  • Specific retirement accounts
  • Employee benefit plan accounts
  • Business/Organization accounts
  • Government Accounts
  • Mortgage servicing accounts
  • Irrevocable trusts with the financial institution as the trustee
  • Annuity contract accounts
  • Public Bond accounts
  • Custodian accounts for Native Americans
  • Accounts established in compliance with the Bank Deposit Financial
  • Assistance Program of the Department of Energy

What types of accounts does the FDIC insure?

FDIC coverage extends to many different kinds of accounts. Checking, savings, CDs and money market accounts are all included in these ranks. So are Health Savings Accounts (HSAs), custodial accounts, traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, self-directed 401(k)s, self-directed defined benefit plans whether they are money purchasing plans or profit-sharing plans, self-directed Keogh plans and Section 457 deferred compensation plans.

Defined benefit and contribution plans are also covered, along with employer-administered welfare plans, business deposit accounts, mortgage servicing accounts, annuity contract accounts and deposit accounts held by the Bureau of Indian Affairs to benefit Native Americans.

Remember that the FDIC max of $250,000 does not apply to each individual account, but rather to all accounts held within an ownership category.

What is not covered by FDIC insurance?

Not every account you can open at a bank qualifies for FDIC insurance. Annuities, mutual funds, stocks, bonds, government securities, municipal securities and U.S. Treasury securities all top the list of uninsurable products you may find at your bank.

Items kept in safe deposit boxes are also not covered. If your bank gets robbed or experiences a natural disaster resulting in loss of money, the FDIC will not cover the losses, though your bank will eat the loss rather than passing on the misfortune to you. Banks actually buy separate bonds as insurance policies for these situations.

FDIC regulations for deposit accounts

Because there are 14 separate ownership categories, you can have much more than $250,000 in insurable funds at any given FDIC-insured institution. The most basic way to understand this is the single account category, where all the accounts held in your name — either directly or via custodian or fiduciary — can only add up to $250,000. If you are a sole proprietor and have an account under a DBA, those funds will also count toward the single account limit.

Joint accounts with two account owners can be insured up to $500,000. The more account holders there are, the more insurance will be provided in increments of $250,000 worth of insurance per account holder. This limit includes money held in all joint deposit accounts, including DBA accounts with multiple owners, but does not include money held in single accounts.

Revocable trust accounts include accounts which either have a legal document drawn up by a lawyer designating them as a part of a revocable trust, or simply bank accounts in which you have set up to have beneficiaries upon your death. The first five beneficiaries receive $250,000 in coverage each, but if you have more beneficiaries the math gets a little more complicated.

You can use the FDIC’s Electronic Deposit Insurance Estimator to figure out your coverage amounts.

If you have an irrevocable trust which you can withdraw funds from in certain circumstances, the portion that you keep interest in will be counted toward the single account category. If you are a beneficiary and there are no contingencies placed on you receiving the money, the funds will also count toward your single account category. However, if the owner places contingencies on you receiving the money, like getting married or going to college prior to the funds being distributed to you, they will count toward the irrevocable trust category and be insured up to $250,000 per beneficiary.

If you have an irrevocable trust with you bank as the trustee, its funds will count toward the accounts held by a depository institution as the trustee of an irrevocable trust category, which is separate from the irrevocable trust category.

Certain retirement accounts include traditional IRAs, Roth IRAs, SEP IRAs, SIMPLE IRAs, self-directed 401(k)s, self-directed defined benefit plans, self-directed Keogh plans and Section 457 deferred compensation plans. Your category total for these plans is $250,000 regardless of the number of beneficiaries.

If you have a retirement plan through your employer which is administered by a third party, it will count toward your employee benefits plan account limit of $250,000. Examples of these accounts include pensions, 401(k)s and Keogh plans.

If you are Native American and have the Bureau of Indian Affairs (BIA) acting as a fiduciary on your behalf, the money held in these accounts are insured up to $250,000. If you hold a personal account as a Native American which is not administered by the BIA, it will not be in this category. Instead, it will count toward your single account limit.

As an individual, the other categories don’t apply to you. Rather, they apply to businesses, insurance companies and in some cases even the bank itself.

How to maximize FDIC insurance

One of the best ways to maximize your FDIC insurance is by taking advantage of the fact that your money can be held across many different categories. Irrevocable trusts are a particularly efficient way to do this as coverage can be extended to many beneficiaries, but you don’t necessarily have to distribute your funds equally upon your death, explains Ken Tumin, founder of DepositAccounts.com, another LendingTree-owned site.

“Sometimes someone might want to insure $1 million at one bank,” Tumin told MagnifyMoney. “You might do that with an irrevocable trust with four beneficiaries. But if you want to keep a majority of the money yourself, you don’t want to put beneficiaries on it. You can create a workaround by establishing one beneficiary who will get most of the money like your spouse, while the three others will receive a smaller amount. That way, you can get your coverage up to the full million.”

He also notes that some financial institutions offer deposit sweep programs, in which the money you deposit into your accounts at one financial institution is effectively spread across several financial institutions. You interact only with your bank, but behind the scenes, they’re spreading out your money so you can get the full $250,000 worth of insurance with each different financial institution your money is technically held within. Two prolific programs include the Certificate of Deposit Account Registry Service (CDARS) for certificates of deposit and Insured Cash Sweep (ICS) for money market and checking accounts.

Tips for keeping your money safe with FDIC insurance

Do not assume that any financial institution has FDIC insurance. In order to verify that your bank participates, use this handy tool.

Some financial institutions offer private deposit insurance. This is especially true in the realm of state-chartered credit unions, but some banks do it, too. Most notably, the state of Massachusetts has several private insurance funds which can insure funds in excess of FDIC coverage limits. The important thing to remember with these private insurers is that funds are not guaranteed by the federal government as they would be with FDIC- or NCUA-insured accounts.

Aside from making sure your financial institution actually has federal insurance policies, one of the best things you can do to protect your money is to make sure you understand the intricacies of the category rules. If you’re feeling overwhelmed, you can use the FDIC’s Electronic Insurance Deposit Estimator (EDIE) to figure out how to best allocate your money to maximize your insurance coverage.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brynne Conroy
Brynne Conroy |

Brynne Conroy is a writer at MagnifyMoney. You can email Brynne here

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Banking

Review of Mvelopes Budgeting App

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

The Mvelopes app helps you make a budget and stick to it. The app mimics the envelope budgeting system — where you place actual cash in physical envelopes — on your mobile device. Placing cash in paper envelopes every month is a budget strategy that’s been around for a long time, and Mvelopes virtualizes this tried-and-true method. If you like the idea of budgeting via envelopes but find it a hassle to use actual physical envelopes and cold, hard cash, Mvelopes may be a budgeting solution for you.

What is the Mvelopes app?

With Mvelopes, you trade the physical cash and paper envelopes of the envelope budgeting system for a website and a mobile app. You synch up bank accounts with Mvelopes, which lets you create virtual envelopes and then assign different amounts to place in each envelope. Mvelopes offers a 30-day free trial, after which you’ll need to decide how many features you’d like to pay for.

Mvelopes has three levels of service: Basic for $6 a month, Plus for $19 a month, and Complete for $59 a month. Choosing to pay annually gives you a discount equal to two months of fees. At the Complete level, Mvelopes gives you a 60-day money-back guarantee, no questions asked.

Features of Mvelopes

The Mvelopes Basic account offers the following features:

  • Digital envelope budgeting
  • Automatic importing/syncing of transactions
  • Monitoring of account balances
  • Interactive reporting
  • Live chat support
  • Weekly webinar

After you open your Mvelopes account, you’ll see a dashboard with six broad budget categories (bills, everyday, giving, goals, periodic, system), each populated with budgeting envelopes. You can add or remove envelopes from these budget categories at any time.

Under each category, Mvelopes provides envelopes for items like auto maintenance, home maintenance, gifts, auto insurance, electricity, phone and so on. You’re free to change these envelopes at any time to match up with your own personal budget categories.

Add financial account to sync transactions

After opening your account, you’ll be asked to sync one or more financial accounts to Mvelopes, like a checking or savings account, or a credit card account. Mvelopes will automatically import your transactions from each account. Imported transactions are automatically assigned to your Mvelopes inbox. From there, you are responsible for categorizing your deposits and purchases into the correct envelope.

The Mvelopes dashboard and reporting features allow you to see at a glance all of the information regarding your funding and spending transactions, along with your budgets and the amounts remaining in each envelope.

Interactive reporting

You can generate three types of interactive reports that help you understand your spending and plan your budget: envelope reports, account reports or spending plan reports. Within these broad categories, you can track envelope transactions and balances, create summary reports and show details of accounts and envelopes.

Live chat support & weekly webinars

Live chat is available at all tier levels Monday to Friday from 9 AM MST to 7 PM MST, but not on Saturday or Sunday.
Mvelopes likes to stress the educational component of its services, and in addition to extensive educational information you can find online, Mvelopes hosts weekly webinars on various financial topics.

Mvelopes Plus features

At the Plus level, you get the features above plus:

  • Quarterly checkup from an Mvelopes Personal Finance Trainer
  • Debt reduction tools
  • Access to educational resources
  • 1-on-1 assistance with setting up your account
  • Priority support

The big advantage of the Plus tier is a quarterly check-in with a personal finance trainer, who helps guides you and provide feedback on your budgeting process. In addition, Mvelopes will custom-design a rapid debt reduction plan that is personally tailored to your financial needs. You can discuss your progress on this plan every three months with your personal finance trainer session.

Mvelopes also offers an interactive learning center to help Plus-tier customers understand the keys to financial success across a broad range of topics.

The Plus tier also entitles you to one-on-one startup support to help you establish your account and set up your envelope budgeting program. It also gives you priority when it comes to support issues.

Mvelopes Complete features

Complete is Mvelopes’ top tier of service, giving customers the following additional benefits:

  • Monthly sessions with a personal finance trainer
  • A customized Mvelopes budget plan
  • Financial education guided by a trainer
  • Accountability and motivation tools

Top-tier Mvelopes clients get monthly access to a personal finance trainer to help keep them motivated and on track toward their budgeting goals. Working in conjunction with their trainer, Complete-tier customers create a customized financial plan tailored to their personal situation.

In addition to the Plus-tier educational resources, Complete-tier customers can learn additional financial planning techniques and strategies, including financial goal tracking, via trainer-guided education.

Advantages of Mvelopes

  • Automatically imports all of your financial transactions
  • Multiple levels of service to meet varying customer needs
  • 60-day money-back guarantee at Complete, its top-tier level
  • Options for unlimited envelopes and personal financial coaching

Downsides of Mvelopes

  • Not completely automated: You still have to categorize your imported transactions
  • Interface is not entirely intuitive or easy-to-use
  • After the 30-day introductory trial, there is no free option available
  • No 24/7 live chat

Mvelopes vs. other budget apps

Mvelopes is uniquely focused on making the envelope-budgeting system easy to use in an online or mobile format. If you’re already familiar with this type of budgeting, the app may be a perfect fit for you. However, there are other options worth examining.

Mvelopes vs. Goodbudget

Goodbudget is one of the few competitor apps to Mvelopes that focuses on the same envelope budgeting system. The apps are very similar, with the main difference in their interfaces and pricing.

Unlike Mvelopes, Goodbudget offers a free option. However, users are only allowed to link a single account. Goodbudget’s paid account costs $6 per month — the same cost as Mvelopes’ Basic account — and offers broadly similar functionality at that level. However, Mvelopes’ premium service tiers give you quarterly or monthly access (for higher fees) to personal financial specialists, something Goodbudget doesn’t offer at any price level.

Mvelopes vs. EveryDollar

EveryDollar is a budgeting app without the envelopes. As the name implies, EveryDollar allows you to track every dollar that comes into or goes out of your linked financial accounts. Like Mvelopes, you’ll start by setting up your budget categories, such as groceries, restaurants, clothing and health care, and assigning your transactions to each segment. Although the categories are not specifically called “envelopes,” they serve the same purpose as with Mvelopes.

EveryDollar has a free version and a paid version that costs $129.99 per year. The free version includes a personal budget planner and an expense tracker. Access to service and savings experts, such as insurance, real estate and tax professionals, comes with the paid version.

Is Mvelopes right for you?

If you’re already familiar with the envelope system of budgeting, Mvelopes might be your go-to budgeting app. However, even at the Basic level, you’ll be paying $6 per month just to digitize your envelopes. Meanwhile, the top tier costs a very steep $59 per month to add monthly financial coaching. The Mvelopes requires you to regularly allocate your funds to individual envelopes, which could be helpful for some users, but cumbersome for others. Whether you stick with Mvelopes depends on your comfort with frequently interacting with your envelopes.

Fees mentioned in the article are accurate as of the date of publishing.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

John Csiszar
John Csiszar |

John Csiszar is a writer at MagnifyMoney. You can email John here

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Banking

How to Pay for Uber and Lyft Rides with Commuter Benefits

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

You may have more options than you think when it comes to getting your employer to foot the bill for your commute. Some commuter benefits packages include ride-share options, and both Lyft and Uber have hopped on board the trend.

Lyft and Uber commuter benefits can be used when riders select a shared Lyft ride or uberPOOL, the apps’ carpooling options. If you’re curious about this benefit and whether or not it’s worth linking your Uber or Lyft account to your commuter benefit account, we’ve got you covered.

What are commuter benefits?

Commuter benefits are an employer-provided benefits program that lets you set aside pre-tax dollars in an account to be used for your commute costs. Employees can use these benefits to pay for public transportation — trains, subways, buses, even parking passes — used on their daily commute with pre-tax dollars. The amount of money you set aside to pay for your commute doesn’t count as income, so you’re not taxed on it.

Which benefits programs are included for Uber and Lyft?

Each ride-hailing service has partnered with select benefits programs; there is significant overlap, though Lyft has a slightly more robust list of partners.

For example, if your company’s benefits package is with Zenefits, Wageworks, Igoe or Pension Dynamics, you can use your commuter benefits with Lyft as well as with Uber. On the other hand, if you use the Benny Prepaid Benefits Card, the Discovery Benefits Visa Prepaid Debit Card or the EBPA Benefits Debit MasterCard, you can only use Lyft.

You can see a full list of the supported commuter benefits programs for Lyft here and for Uber here.

How do I sign up for commuter benefits?

Workers have to sign up for commuter benefits in order to receive them. When you sign up, you will be asked to select how much money you want to set aside from your paycheck each month to cover your transportation costs.

Once you’re enrolled, you may receive a benefits card (it can be used like a regular debit or credit card) to make transportation purchases. Otherwise, you may be able to cover transportation expenses using your regular credit or debit card and then submit a claim to be reimbursed through your benefit provider.

Reach out to your employer’s human resources department to find out how to take advantage of your commuter benefits program.

How much can I really save?

Depending on your current tax bracket, you could save as much as 37% on your commute by using commuter benefits. For example, if you’re in the 35% tax bracket and contribute $200 each month to your commuter benefits account, you’re getting an extra $70 to spend on your commute each month. That’s an extra $840 per year.

But here’s the catch: Commuter benefits contributions are capped at $270 per month. So if you are already relying on your benefits to finance your monthly subway pass or parking garage expenses, you may not have much left over for Uber or Lyft commuter benefits.

What are Lyft’s shared rides and uberPOOL?

To use commuter benefits to pay for Lyft or Uber rides, you have to select the apps’ carpooling options — either Lyft’s shared rides or uberPOOL.

Carpool vehicles seat six or more passengers, whether you’re using Lyft or Uber. Both Uber and Lyft use algorithms to place riders going toward the same area in the car together. Because you’re carpooling, however, you may or may not have a longer commute, depending on traffic in your city and how many other riders get picked up or dropped off during your trip.

Where are these benefits available?

Whether Lyft or Uber commuter benefits are available in your location depends on which rideshare option you want to use.

If you prefer Lyft, you’re in luck: As long as the company offers shared rides in your area, you can use your commuter benefits to fund your rides, assuming, of course, your company uses a partner benefits program. Here is a full list of cities where Lyft offers shared rides.

Uber users, on the other hand, can use the commuter benefits everywhere that uberPOOL is available, with the exception of Nashville, Tenn. and Portland, Ore.

How to use commuter benefits on Lyft

If you’re interested in using commuter benefits on Lyft, here’s how to set it up:

  1. First, you need to add your commuter benefits card to your profile. When you open the Lyft app, tap “Payment” in the left-hand side menu to see your payment options.
  2. Select “Add card,” enter your commuter benefits card information and press save.
  3. Next, set the card as your default payment method. There are two ways to do this:
    • Select the card as your default payment method for your personal profile under the “payment defaults” section in the “Payment” menu.
    • When you open the app, set your location and destination. You’ll then see the last four digits of the card that’s being used to pay for the trip. Tap the numbers to change your payment method to your commuter benefits card. You should see a rectangular icon with a diamond in its center when using your benefits card.
  4. To use your commuter benefits on a ride, select “Shared.” You can only use your benefits to pay for carpools under the “Shared” ride option, located under the “Economy” tab.

How to use commuter benefits on Uber

Prefer to use Uber? Here’s how you can set up Uber commuter benefits:

  1. Add your commuter benefits card to your profile by going to the left-hand menu and adding your commuter benefits card under “Payment” (it may also be listed as “Wallet.”) You can also add the card after setting your location and destination under uberPOOL, shown below.
  2. Tap on your card information to set or add your commuter card as a payment option.
  3. Your benefits can only be used to pay for carpools under uberPOOL. Select the pooling option to be matched with a car with six or more seats, and you’ll be good to go.

Pros of using Uber and Lyft commuter benefits

  • Use pre-tax dollars to save: The most obvious perk of using your commuter benefit is that you’re using pre-tax dollars, so your dollar can go up to 37% further. If you’re already paying out of pocket for your commute, this could be a huge benefit, freeing you up to use that cash on something else.
  • Cut back on driving: According to the latest available five-year estimates from the U.S. Census Bureau, the average commute takes about 27 minutes — though if you live outside of a larger, more congested city, it could be significantly longer. If it’s more affordable for you to use a ride-sharing app, you can use that time to read, catch up on work or take a nap while you ride, instead of letting the stress of navigating from point A to point B get the best of you.
  • Reduce your carbon footprint: Since these benefits are restricted to carpooling with at least six or more passengers, taking advantage of it means contributing to a smaller carbon footprint, and that’s especially true if you usually drive to work solo. Using a ride-sharing app takes the hassle out of organizing a carpool.

Cons of using Uber and Lyft commuter benefits

  • Only shared rides are eligible: You may want to put your pre-tax dollars elsewhere if you’re not into making new friends each morning. You’ll be placed in a vehicle that seats six or more people when you use your benefits card, and other riders may have various personality types that may not mesh so well with yours, if, for example, you tend to be in zombie-mode before your coffee kicks in and prefer to sit in silence.
  • Contributions are limited: Your contribution is limited to $270 a month, which may or may not be a month’s worth of commuting, depending on how much your commute costs. For example, an analysis by LendingTree, the parent company of MagnifyMoney, found the average monthly cost of commuting with Uber’s non-pool service UberX in New York City is more than $700. Still, $270 pre-tax will help cut down on your monthly spending for the trip to work.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Brittney Laryea
Brittney Laryea |

Brittney Laryea is a writer at MagnifyMoney. You can email Brittney at [email protected]