by Kevin Mulligan
If a new bank purchases your now-defunct institution, you’ll follow some simple steps depending on which products you held:
* For Loan Products: You must keep up with your payments for any loans or lines of credit that you have with the bank. Bank failure isn’t an excuse for missing payments; you’ll just owe the money to a new lender. A failed bank’s loan products are very valuable to other banks, so another business will quickly buy up your loan and send you new paperwork and instructions on where to send your payments. They will charge late fees and penalties even during the transition, so keep on paying as if your bank never failed.
* For Deposit Products: When a new bank takes over your account, read the fine print on their account agreements. You’ll probably have a new fee structure and maybe even new account minimums. If the new policies are too restrictive or expensive, you can move your funds to a different account type or find a new bank.
* For Automatic Deposits: What happens to your direct deposits like your paycheck or social security payments? Since these are of critical nature, the FDIC will immediately appoint a new bank to temporarily accept these payments. You may get an update in the mail, but the best way to get this information is at your local bank branch. It’s the one time it’ll actually be worth going to your bank in person after the failure.
Final Word: The best way to get through the ordeal of a failure is to avoid problems in the first place. Do you banking with safe institutions only. Ideally, you’ll find one that’s safe enough to stay in business, but since you can’t always predict mistakes, at least make sure that you choose a bank that is insured by the FDIC. If you’re approaching the maximum for FDIC coverage, open a new account with another insured institution so you’ll be confident in your coverage. If you’re a little scared right now and you’re curious about how your bank is doing, take a look at your bank’s health rating. Steer clear of banks near the lower end of the scale, and you’ll be less likely to find yourself – and your bank – in trouble."