There's an important complication and source of confusion.If you are opening an account that you believe will have FDIC insurance, go to the FDIC web site and look up the bank. Get their physical address or routing number from the FDIC, and either mail deposit checks to that address, or use ACH push to deposit from an already trusted source.
There is a modern trend for banks, typically long-established physical banks, often paying low interest, to create new entities with a legal relationship I don't understand. Then new entity is a "division," with trendy light-hearted names, an Internet-only presence, and often more-attractive rates.
A good example would be Redneck Bank, "Where Bankin's Funner." Their landing page features an animated housefly wandering all over the page.
The fine print says:
Notice the confusing similarity between that language and that of the fintech not-banks. In both cases, the name of the bank is not going to show up in FDIC Bankfind. In both cases, the website refers to some other bank, and that other bank is indeed an FDIC member. In one case, the banking service is a "division of" an FDIC member. In the other, it is a "partner with" an FDIC member. In both cases, the landing page is likely to say "FDIC insured," often in big letters.Redneck Bank® is the Internet Banking Division of All America Bank®, established in 1969.
Certainly, there are subtleties. The really-a-bank will usually display an FDIC logo and the words "Member FDIC." The not-a-bank won't.
Redneck Bank has the logo and says "Member FDIC." But you can't find it under that name on the FDIC BankFind website. If you were being very careful, how would you verify that? Trust their website statement that they are "Member FDIC?" Trust their statement that they are a "division" of a bank that is verifiably an FDIC member?
Is FDIC membership transitive to "divisions?" If Bank X is a division of an FDIC member, is Bank X automatically an FDIC member? How would I verify it's really a division--Secretary of State Corporations website?
My grandson just opened his first bank account, under his dad's guidance. He needed a physical bank and the issue didn't come up. But if you were talking to an adolescent about internet banking, what could you say as an 30-60 second "elevator pitch" on how to tell a different-named-division-of-a-real bank from a fintech-with-partner-bank? Just typing that sentence makes my own eyes glaze over.
Statistics: Posted by nisiprius — Thu Nov 28, 2024 8:13 am — Replies 364 — Views 44998