The FDIC’s Transaction Account Guarantee Program provides unlimited coverage for non-interest bearing accounts and certain low-interest accounts. It is separate from the general deposit insurance coverage and requires a separate fee. The program was designed to be temporary and expired on December 31, 2010.
The term “transaction guarantee” refers to a US program that insures all non-interest bearing bank accounts and certain low-interest bank accounts that do not bear interest above a specified amount. The Federal Deposit Insurance Corporation (FDIC), an insurance company, established the Temporary Liquidity Guarantee Program (TLGP), which has two components. The first component is the Debt Guarantee Program, which insures unsecured debt. The second component is the Transaction Account Guarantee (TAG) program, which banks and other institutions often call the FDIC transaction guarantee program. This program is separate from the FDIC’s general deposit insurance coverage, which insures deposits up to a specified amount.
The FDIC’s transaction guarantee program is temporary. Provides unlimited coverage for specific accounts. Ordinarily, the FDIC insures deposits held at banks and other thrift institutions through its general deposit insurance coverage. The FDIC’s Transaction Guarantee Program will provide additional coverage to protect accounts that exceed the FDIC’s general coverage.
To qualify for Transaction Guarantee Program coverage, an account must not earn interest. The account must also allow the holder to make an unlimited number of deposits and withdrawals. Usually these are checking accounts. The Transaction Guarantee program also includes certain low-interest accounts, such as Interest-Only Attorneys’ Trust Accounts (IOLTA) and Negotiable Order Withdrawal (NOW) Accounts. The program does not set a limit on the amount covered.
Typically, to obtain protection under the FDIC’s general deposit coverage, banks and other thrift institutions must pay an insurance premium to the FDIC. If a bank fails, it will file a claim with the FDIC to pay account holders up to a specified amount. Under the FDIC’s Transaction Guarantee Program, banks and other institutions must pay a separate fee to participate in the program. This will allow the institution to provide full coverage protection to certain account types because there is no limit on the amount covered by the program. This means that the transaction guarantee program will cover any amounts not protected by the FDIC’s general deposit insurance.
One of the purposes of the transaction guarantee program is to get banks to start lending to businesses and individual consumers. However, the program was designed to be a temporary response to widespread financial concerns stemming from the recession, and was due to end on December 31, 2010. After the program expires, account holders will continue to have protection under the coverage of the FDIC general deposit insurance. which in 2010 insured up to $250,000 United States Dollars (USD) per account holder. This amount is expected to decrease to $100,000 USD on December 31, 2013. The FDIC protects account holders only if the bank pays the premium for the insurance coverage.
Smart Asset.
Protect your devices with Threat Protection by NordVPN
