Among the most defining images of the Great Depression are pictures of frenzied bank runs, with desperate and frantic mobs of customers storming failing banks to withdraw their money before their financial institutions folded and took their life savings down with them. The effort was often in vain.
Roughly 9,000 banks collapsed between 1930 and 1933, leaving many of the people and businesses whose money they vowed to safeguard penniless and ruined.
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That calamity spurred major banking reforms through federal legislation to restore public faith in the industry and to protect the assets of depositors who trusted that the bank would keep their money safe. Many of those reforms are still in place today, and other protections have further shored up the system in the ensuing decades.
Together, they safeguard your assets more securely than even the biggest and heaviest vault ever could. GOBankingRates spoke with an industry pro who outlined the most important ways that banks protect your money.
Banks and Credit Unions Insure Your Deposits
On July 5, 1934, a woman named Lydia Lobsiger became the first depositor to receive an FDIC insurance payment. It restored her life savings of $1,250, which she lost when her bank failed.
She escaped financial ruin and destitution thanks to the 1933 Emergency Banking Act, which FDR signed into law. Among other things, the comprehensive legislation created the Federal Deposit Insurance Corporation (FDIC), which originally insured deposits of up to $2,500. From that moment forward, the federal government guaranteed that depositors like Lobsiger could get their money back if their bank was robbed, failed, suffered insolvency or anything in between.
Ninety years later, the security of FDIC insurance remains the most ironclad protection in the American monetary system. With virtually no exceptions, the money you put in an FDIC-insured bank account is safe. The same applies to nonprofit, member-owned financial institutions, although they’re insured by a different entity.
“The National Credit Union Administration, or NCUA, is the equivalent to FDIC for banks,” said Izabella Bogumil, relationship advisor with Addition Financial Credit Union in Lake Mary, Florida. “Like the FDIC, The NCUA insures your deposits typically up to $250,000 making the deposits guaranteed no matter what. Having that extra safety net can bring a piece of mind to those trusting that their money will always be there for them.”
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They Implement and Follow Strong Security Protocols
Governmental laws and regulations mandate some of the anti-fraud and security measures that financial institutions follow, but many enhance their asset-protection measures with their own internal safeguards, too.
“Banks and credit unions have guidelines and procedures in place to protect your assets from scammers,” said Bogumil. “These methods include multi-step verification, encryption, firewalls, and fraud detection. All these procedures are put in place to not only protect customers’ or members’ assets but also to protect their personal information, as well.”
They Provide Crucial Financial Education
The internet and its many scattered social media platforms are bursting with misguided, misleading and downright false information about money management. Some of the most reliable sources for trustworthy, updated, concise, and actionable tutorials come from financial institutions themselves — and educated consumers can play an active role in partnering with their banks to safeguard their hard-earned assets together.
“Banks and, to a greater extent, credit unions, place emphasis on providing financial education resources to their customers and members,” said Bogumil. “My team regularly helps members understand different types of fraud tactics so they can always be on the lookout for anyone potentially trying to steal their bank account information. This way, not only is the financial institution protecting their assets, but they can shield themselves, as well.”
Relationships and Personalized Service Are Among the Strongest Safeguards
Online-only banks and algorithm-based upstarts promise streamlined service, an all-in-one banking experience, one-touch convenience and often better rates and yields. What they lack, however, are the personal relationships that branch-based banks and credit unions have used for generations to identify potential security risks to their customers before they materialize into security breaches.
“An advantage community banks and credit unions have over online banks and fintechs is in their ability to build relationships with their customers and members,” said Bogumil. “Having these relationships can be a lifesaver when bank and credit union teams can identify signs of distress and fraud more easily through in-person interactions. You can also have more in-depth conversations about how to prevent theft and identity fraud as communication becomes easier when you get to know someone.”
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This article originally appeared on GOBankingRates.com: I’m a Banking Expert: 4 Ways Your Bank Helps Protect Your Assets
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
