What Happens to My Money if My Bank Closes? (2024)

There have been 566 bank failures since 2001. That might seem like a large number, but nearly 400 of those banks failed in the years following the Great Recession.

Only four banks have failed since 2020, however, including Silicon Valley Bank, Signature Bank and First Republic Bank earlier this year

While bank failures can happen, they are rare. A bank or credit union remains the best way to store savings, as long as the institution is insured by the Federal Deposit Insurance Corporation or National Credit Union Administration. This insurance protects your money up to $250,000 per person, per account category.

Why do banks close

A bank typically closes when it doesn’t have enough money to pay its creditors and depositors. In other words, its financial liabilities outweigh its assets and liquidity. When a bank fails, the FDIC steps in to find another bank to acquire the failed one. If the FDIC can’t find another bank to take over the failed bank’s assets, the FDIC will reimburse depositors up to the insured limit of $250,000.

When Silicon Valley Bank failed in March, for example, deposits were sold to First Citizens Bank. If you were banking at Silicon Valley Bank before the failure, your accounts were automatically converted to First Citizens accounts.

What a bank closure means for your money

If your bank or credit union closes all of its branches due to a bank failure, you may need to move your money to a different bank altogether. If you don’t move your funds before the bank closes, here’s what you can expect:

If your bank is FDIC- or NCUA-insured

Most banks are insured by the FDIC, which protects your deposits for up to $250,000 per person, per account type, including checking, CDs, money market and savings accounts. If your bank closes, the FDIC will either try to move your money to another bank in good standing or mail you a check for up to the insured amount. If your money isn’t moved, the bank should mail you a check within two business days of the bank closing.

If the money is in a trust or issued through a broker or employer plan, the FDIC will need supporting documentation -- and it may take longer to receive your funds. If you have more than $250,000 in your account, it’s still possible that you can receive the full amount, but you’ll need to file a claim with the FDIC. Then, as the bank’s assets are liquidated, you may receive payments.

The FDIC doesn’t protect the following, even at insured banks:

• Annuities
• Bonds
• Crypto
• Life insurance policies
• Mutual funds
• Safe deposit boxes
• US Treasury bills

Similar to the FDIC, the NCUA insures credit union bank accounts. If your credit union is NCUA-insured and decides to close, you’ll receive a notice by mail. If you don’t move your money to another account before the credit union closes, it will send you the funds from your deposit account within five days of the credit union closing, according to My Credit Union, an official website of the NCUA. If your balance is higher than $250,000, you’ll need to complete a Member Confirmation and Affidavit form to receive any funds over the insured limit.

The NCUA doesn’t cover losses from the following:

• Annuities
• Bonds
• Life insurance policies
• Mutual funds
• Stocks

If your bank is not insured

If your bank is not insured, the FDIC or NCUA may still transfer your accounts to another bank.

If the new bank is not FDIC or NCUA-insured, you can move your funds to the bank of your choosing. Just make sure the new bank is insured to protect your deposits. You’ll still need to file a claim with the FDIC or the NCUA, but there’s no guarantee you’ll get your money back.

If your bank shuts down a branch

Say your FDIC-insured bank isn’t going out of business, but instead chooses to close a branch. Your bank must notify you at least 90 days ahead of the closing date, according to the Federal Reserve. It should also post a notice at the branch location.

When a bank closes, it might not announce the reason publicly to customers. If the bank is part of a larger network, it could close some physical branches to decrease its overhead costs. But if it’s an independent bank or the only branch nearby, you may need to find another way to manage your money.

If this happens to you, you can choose to bank at a nearby branch or online. However, if a branch closes and online banking or visiting another branch is inconvenient, you’ll need to find a different place to store your money.

Recent examples of bank failures

Bank failures have been less common in the past few years, but they can still happen, so it’s important to have your money at an FDIC-insured bank or NCUA-insured credit union.

After Silicon Valley Bank and Signature Bank collapsed in March – two of the largest US banks to fail since the Great Depression – widespread panic surfaced over concerns about the stability of the banking system. Just two months later, First Republic Bank also shuttered.

When Silicon Valley Bank went under, the FDIC transferred all of its deposits to a temporary bridge bank – Silicon Valley Bridge Bank – so depositors could access their money before First Citizens Bank stepped in to acquire SVB in late March. At the same time, the New York Community Bankcorp took over Signature Bank, and JPMorgan Chase Bank assumed all deposits for First Republic Bank.

Before these high-profile bank failures, it had been over two years since the last bank failure in 2020.

Six largest bank failures to date

What to do if your bank closes

Regardless of why your bank closed, you have options for managing your money.

• Open an online bank account: If you rarely visit a physical branch, you might prefer to open an account online for everyday banking. Some online banks and credit unions even offer co-op or shared branches, like Connexus Credit Union. When a credit union is part of a co-op, its members can perform transactions and other banking services at any participating credit union. Co-ops also tend to offer more locations across the country for in-person services.
• Look for another physical branch bank: If you prefer to bank somewhere with a physical branch, look for another bank with some of the same services and features you’re used to. If your bank is regional, there may also be another branch nearby.

But what happens if you can’t find a nearby branch and online banking isn’t an efficient solution for you? In this case, you might face a problem that plagues 5.6 million Americans -- you may be living in a banking desert, according to the Federal Reserve.

How to navigate a banking desert

Between 2008 and 2020, more than 13,000 bank branches (approximately 14% of all banks) shut down across the US, according to the National Community Reinvestment Coalition. As more banks and branches close across the country, your physical branch choices may be limited. If you no longer have a bank within 10 miles of your home, you’re in what’s considered a banking desert, according to the Federal Reserve. Living in a banking desert -- an area where access to a physical bank is unavailable -- can make banking more challenging.

Not having access to a physical bank is inconvenient -- and in many cases, it can make managing your money more expensive. Obtaining simple banking services like depositing cash into a bank account, cashing a check, obtaining a cashier’s check or sending a wire transfer can be costlier without a physical bank nearby.

Here are some solutions that may make banking more accessible if you’re in a banking desert:

Use mobile banking, but have a backup plan

You may use online banking to handle day-to-day transactions, such as depositing a check or transferring money to a savings account. But you’ll need a backup plan when you need in-person services.

One solution may be driving to the nearest physical bank, even if it’s not close by. You can also call your bank’s nearest physical branch for help if the bank is too far or you need help with a banking service. For instance, if you need a cashier’s check, you may be able to ask the bank to mail it to you. Not all banks will do this, but if yours does, it could save you the trip.

Go to stores with banking services available

If you need to cash a check or wire money regularly, traveling far might not be possible or convenient. Sometimes, you can handle some banking services at your local convenience or grocery store. Some banking services require a fee but are still safe and convenient. Here are a few major businesses with banking services to help make banking more convenient if a branch isn’t nearby.

• CVS
• Fred Meyer
• Fry’s Food
• Kroger
• Harris Teeter
• Publix
• Ralphs
• United States Postal Service
• Walgreens
• Walmart

Talk to others in your community for help

If you’re in a banking desert, chances are you’re not the only one in your neighborhood looking for a solution. Ask your neighbors, coworkers or friends how they manage their money without a nearby bank. They may know of convenient ATMs with banking services or other community resources. And, if traveling out of town is the best option, you may be able to carpool together to make trips, helping to save money on gas.

You can also ask your employer about banking relationships available within your company. As an employee, you may have access to lower fees and special banking benefits for your area.

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