NetBank Shuts Down But Customers Are Protected By FDIC
Published 9/29/07 (Modified 3/8/11)
Well yesterday, NetBank greeted its online customers with a jaw dropping notice on its website announcing that the federal government had shut it down because the bank had finally collapsed due to the weight of significant losses from loan defaults. With that, NetBank became the latest victim to keel over due to the subprime mess, with too many subprime credit borrowers defaulting on their mortgage loans.
When I read the news my heart stopped its beat for a second as I realized that I owned a NetBank account. I had written a previous entry about how I had opened a NetBank checking and savings account with a few small initial deposits to take advantage of the bank's reward promotion. But then I remembered a few more facts. First, I had already fulfilled the terms of the promotion and had already transferred my funds out of my NetBank account, thus leaving the account with zero funds. Secondly, even if NetBank went out of business, all of its deposits were federally insured up to $100,000 for each customer. Either way, I had nothing to worry about. Whew! :)
Even When Banks Like NetBank Go Out of Business Your Money Is Protected and Safe
Unless you have more than $100,000 combined deposited, your funds are safe even if the deposit bank shuts down. U.S. Banks like NetBank are federally insured by the U.S. Government run Federal Deposit Insurance Corporation (FDIC), which currently guarantees checking, saving, and certificate of deposit accounts in member banks up to $100,000 per depositor.
In this case, NetBank's deposits have been assumed by ING Bank. Thus if you were a former NetBank deposit customer, you have officially become a customer of ING Direct. If you have total accounts under $100,000 your money is completely safe and now resides with ING Bank. If you're one of the rich guys or rich gals and have more than $100,000, you become a creditor to NetBank's receivership for the portion above $100,000. As a creditor you will lay claim to NetBank's remaining assets after the FDIC has sold off as much of NetBank's remaining assets as possible.
When banks close, it's natural to panic and worry, but this is one area that the federal government actually does a good job. If the bank is FDIC insured, your money is thankfully safe.
Since we're on the subject, keep in mind that while FDIC protects deposits made in banks, money in investment brokerage accounts in the form of stocks, bonds, and money market funds are not covered.