Checks and Balances: New Rules, New Strategies for Bank Customers in the 21st Century

Summer 2004
Checks and Balances: New Rules, New Strategies for
Bank Customers in the 21st Century
Changes are coming that will make it more important than ever to actively manage your
checking account to avoid costly mistakes. This is not your father’s checking account.
How often do you visit or have some
contact with your bank? Chances are
you’d say it’s only once in a while and
certainly not every day. But if you
think about it, you probably do have
dealings with your bank almost every
day through your checking account.
Consider how often you write checks,
make deposits (including direct
deposits), use your ATM or debit card
or make automated payments from
your checking account, and you’ll be
reminded about how much you
depend on these services from your
bank. According to the Federal
Reserve System, Americans write
about 40 billion checks a year. In
INSIDE
Saving time and money
shopping for an auto loan
Page 5
Want multiple copies of our
addition, electronic payments from
their checking accounts, including
newsletter? How to help
checking accounts — using a debit
how to resolve errors, avoid bouncing
yourself
card (to deduct payments directly
checks, keep fees low and protect
Page 6
from your bank account), online
against fraud.
banking (to pay bills, move money or
Especially important: More changes
New tax-advantaged savings
conduct other transactions using your
will be coming as a result of “Check
account for medical costs now
computer) or other automated
21,” short for the Check Clearing for
available
services — already outnumber paper
the 21st Century Act. This law, which
Back Page
checks as a payment of choice (see
takes effect on October 28, 2004, will
Page 4).
allow financial institutions to process
Reminder: New FDIC
And while consumers access their
“substitute checks,” high-quality
publications explaining deposit
checking accounts all the time, we
paper reproductions of both sides of
insurance coverage
know from the many phone calls and
original checks. Each substitute check
Back Page
letters we receive that people often
will be created from an electronic
have questions or concerns about
image of an original paper check.
continued on next page

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Checking in the 21st Century
Over time, Check 21 will make check
with your monthly statement. Do not
account. You also should be aware
processing faster, and that has real
rely on your ATM receipt for balance
that some banks, at their discretion
implications for check writers and
information because it may not reflect
and usually for a fee, may pay
check depositors. Example: If you
outstanding checks or debit card
overdrafts under certain conditions
currently get your original cancelled
transactions.
even if the customer hasn’t signed up
checks back with your monthly
for a particular program.
“If this is a joint account, make sure
statement, in the future you may get
you know the dollar amount of each
These and other overdraft services —
substitute checks instead.
check, ATM withdrawal or debit card
and their costs — can vary
Given these changes, FDIC
transaction that the other person is
significantly from bank to bank. “It’s
Consumer News offers the following
making, so you don’t overdraw the
really important to remember that
tips and information about what to
account inadvertently,” Kincaid says.
this service is essentially a loan so
look for… and what to look out for…
“It’s hard enough keeping track of
there can be interest charges or other
when choosing and using a checking
things when one person is using the
fees,” says Kincaid. Also, if you do
account.
account.”
not pay the overdraft and the bank
closes the account, you most likely
1. It’s more important than ever to
Also, carefully consider the pros and
will have difficulty opening a bank
avoid bouncing checks. A check
cons of signing up for an overdraft
account elsewhere.
deposited in a bank generally travels
line of credit, which means the bank
by airplane and truck until it reaches
will automatically cover checks you
The potential for faster check
the paying bank, typically about one
write (up to an agreed amount) even
processing as a result of Check 21 has
or two days later. As a result of Check
if you don’t have enough funds in the
other implications for check writers.
21, more checks will be processed
electronically… and faster. That
Key Laws Governing Checking Accounts
means you need to have enough
money in your account when you
Here are some common consumer concerns and a look at upcoming
changes that may affect you.
write a check or run the risk of
having checks bounce.
Funds availability: One way depository institutions protect themselves
against losses from bad checks is to put a “hold” on certain deposits.
While it’s always our advice to have
The Expedited Funds Availability Act of 1987 sets the maximum time
enough money in your account
periods that financial institutions may hold funds deposited by check
before you write a check, we realize
before making the money available for withdrawal. Also, the new Check
that some people don’t always do
Clearing for the 21st Century Act (called Check 21), which becomes
that — they’ll write a check on the
effective on October 28, 2004, will speed up the check clearing process
28th of the month expecting their
Erroneous or fraudulent payments: In general, most of the
paycheck to be deposited on the 30th
protections against improper payments are covered by state laws, which
of the month, just in time to cover
can vary significantly. Typically, a bank is liable to its customer if it
that check. “But if the checks clear
charges its customer’s account for a check that is not “properly payable,”
sooner as a result of Check 21,” says
although state laws also generally require customers to review monthly
William Henley, Jr., an FDIC
account statements and report any unauthorized transactions promptly.
electronic banking specialist, “there is
The new federal Check 21 law, which authorizes banks to pay based on a
a greater risk that a check will bounce
substitute check instead of an original check, includes provisions for
if sufficient funds are not in your
“expedited recrediting” in cases of improper payment. And the
account when the check is written.”
Electronic Fund Transfer Act, which governs consumer rights and
responsibilities for debit cards, also puts a premium on prompt
And a bounced check can be costly,
notification of an unauthorized transfer using your card. Important: If
with fees typically in the range of $15
you wait longer than 60 days after the date the bank mails the statement
to $30 per check.
containing the debit card error, you could be liable for the full balance
in your account plus any overdraft line of credit.
What can you do to avoid bounced
checks? Janet Kincaid, FDIC Senior
If you need proof of a payment: Your original cancelled check or
substitute check with endorsements provides proof of payment, although
Consumer Affairs Officer, says the
images of checks are also accepted often. Under Check 21, your bank
first step is to keep your checkbook
may provide you a substitute check that is the legal equivalent of the
up to date. Be sure to deduct ATM
original check
withdrawals, bank fees and debit card
purchases. Compare your checkbook
FDIC Consumer News
Summer 2004
2

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Checking in the 21st Century
One is that you may have less time to
standards, legally it would serve as
place a “stop payment” on a check
proof of payment. And what if a
As a result of Check 21, more
you’ve written.
bank’s substitute check falls short of
checks will be processed
those standards? FDIC attorney
electronically… and faster. That
2. Expect to get substitute checks
Michelle Borzillo says that “Check 21
from your bank as proof of
means you need to have enough
provides warranties and remedies to
payment instead of original
money in your account when you
protect parties to the transaction.”
cancelled checks. For many years,
write a check or run the risk of
banking institutions have “truncated”
Note: Banks have been providing
having checks bounce.
checks for some customers. This
images of checks for decades to
means the institutions do not return
millions of customers who do not
cancelled checks in monthly
receive original checks. These images
Winter 2003/2004 issue of
statements. Instead, they keep
often are accepted as proof of
FDIC Consumer News at
original checks for a short period and
payment by the IRS, courts and other
www.fdic.gov/consumers/consumer/
send statements showing images of
parties provided they meet certain
news/cnwin0304/phishing.html.
cancelled checks. Or, some banks
requirements.
Be wary of offers to send money —
only list check transactions on
3. Protect against check fraud,
perhaps to buy something you’re
monthly statements and don’t
which is getting increasingly
selling or forward lottery winnings
routinely send cancelled checks or
sophisticated. Bank security
you’ve supposedly won — and you’re
images. Now, Check 21 is expected to
procedures cannot stop all frauds,
asked to accept a cashier’s check for
reduce the instances in which original
which may involve printing or
more than the amount due and wire
checks are returned with statements.
altering checks or obtaining account
the “excess” money back. The
Here’s what’s happening:
numbers used to arrange for
cashier’s check often will be
As before, if you write a check to
“payments” from accounts. You can
counterfeit and you will be
someone who is not an account
help by promptly reviewing your
responsible for the money you wired
holder at your bank, your original
bank statement each month and
to the con artist.
check will be deposited at another
immediately reporting any
Take safety precautions with your
institution. The check then travels to
unauthorized transactions. Or, better
checks, too. Don’t carry more checks
your bank for payment. But when
yet, monitor your account more
than you expect to use, keep extra
Check 21 takes effect, the bank where
regularly online or through telephone
checks in a secure place, and contact
the check is deposited will have two
banking programs at your bank.
your bank immediately if any of your
choices. Option one is to return the
Timely notification of a problem can
checks are lost or stolen.
original check to your bank, as was
limit your potential liability (see
done in the past. The second option,
Page 2), stop a fraud or assist in
And consider direct deposit of your
under Check 21, will be to create an
an investigation.
paycheck and other checks you may
electronic image of the check,
receive, such as Social Security
Also protect your account
produce a substitute check and send it
payments, as a way to prevent them
information. For example, only give
to your bank. This second option
from being lost, misplaced or stolen
your checking account number,
means your original cancelled check
out of mailboxes. “Direct deposit
including the routing numbers at the
is no longer available to you.
isn’t just safer than handling and
bottom of your check, to businesses
mailing paper checks — it’s also
“Before Check 21, it was your bank
you know are reputable. Never
faster,” says Kincaid. “In addition,
that decided whether to return all
provide checking or credit card
some banks will reduce their checking
your original cancelled checks with
information, Social Security numbers
account fees if you use direct
your statement,” says Henley. “Soon
or other personal information in
deposit.”
your bank may not have the option of
response to an unsolicited call or
returning all your original cancelled
e-mail, which could be fraudulent.
To learn more about how to defend
checks, even if it wants to.”
For more information about Internet
against check fraud and other
“phishing” scams in which thieves use
financial scams, see the Spring 2003
What if you must prove a disputed
fake Web sites and e-mails to mislead
FDIC Consumer News special report
payment and your bank has given you
consumers into divulging valuable
on fraud at www.fdic.gov/consumers/
a substitute cancelled check, not your
personal information, see the
consumer/news/cnspr03/index.html.
original cancelled check? As long as
the substitute check meets Check 21’s
continued on next page
FDIC Consumer News
Summer 2004
3

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Checking in the 21st Century
4. Periodically ask yourself, and
your bank, if you’re getting the
Electronic Payments Surge: How and Why
best deal. If you think all checking
More consumers conclude that e-checking is cheaper,
accounts are pretty much alike, you’d
better think again.
easier and faster than writing and mailing paper checks
Your bank probably has several types
Americans have relied on paper
the FDIC’s Division of Supervision
of checking accounts with different
checks as a primary payment method
and Consumer Protection.
features, fees, yields, minimum
for generations. Yet the latest
Some people also want to have
amounts to open an account, and
research from the Federal Reserve
“something tangible to prove you
other characteristics tailored to
System indicates that consumers
paid for a purchase or to show the
certain kinds of customers. And
increasingly are tapping their
IRS agent,” Lee adds.
different banks offer different
checking accounts electronically
checking products. Checking
instead of through paper checks.
But electronic payments are growing
accounts from the bank down the
dramatically as more consumers
After rising for many years, the
street or even on the Internet may be
conclude that transacting business
number of checks paid by financial
more to your liking.
electronically is cheaper, easier and
institutions in the U.S. declined from
faster than writing and mailing paper
How can you take advantage of this
49.5 billion in 1995 to 42.5 billion in
checks.
freedom of choice? “First sit down
2000, according to a 2002 study
and evaluate your needs, perhaps with
published by the Fed. In contrast, the
Example: “Once online bill payment
the help of a customer service
number of electronic payments (such
is set up with your bank,” Lee says,
representative at your bank,” says
as automatic bill paying and Internet
“you only need to go online, select
Kincaid. Ask yourself: How many
banking) and debit card payments
the vendor to be paid, choose a due
checks do I write each month? Do I
combined surged from 18.9 billion to
date, key in the amount, and click the
plan to pay most of my bills without
42.8 billion during the same five
pay button.”
checks, perhaps by phone or over the
years.
Other popular electronic alternatives
Internet? Do I use an ATM or a debit
While fewer checks are being written
include direct payment programs (in
card regularly? How much of a
in the U.S., the number is still very
which you authorize your bank to
balance do I plan to routinely keep in
large. Among the reasons Americans
automatically pay bills, such as your
the account?
still like paper checks: They’re
mortgage or health club dues) and
Perform this kind of review every
familiar and reliable.
telephone banking (which enables
year or two. Perhaps you’ll discover
you to pay bills any time using a
“Consumers generally understand
that your existing checking account is
touch-tone phone).
how cash, credit cards, and checks
still right for you or that switching to
work because we can visually see the
a different account (at your bank or
process and have control,” says
To Learn More
elsewhere) could save you money or
Robert Lee, a technology specialist in
bring you a better value.
Changes and new choices in
your life as a bank customer
can be unsettling or
Merchants Now Process Checks Electronically
confusing, but you can make
the most of the situation by
Many stores will accept your check at the sales counter, scan it through a
being informed and
reader, hand the voided check back to you and then use the information
proactive. If you have a
from your check to arrange for an electronic fund transfer. A similar
question or a concern about
process may occur when you mail a check to pay a bill.
your checking account or
For information about what you need to know about this way of quickly
the different ways to make a
processing your check, including your right to receive advance notice of
payment, first contact your
an electronic fund transfer and how to resolve a problem, read the Federal
bank. If you need additional
Reserve’s brochure When Is Your Check Not a Check? at
assistance, you can always
www.federalreserve.gov/pubs/checkconv or the Federal Trade
call or write your
Commission’s E-Checks (Electronic Check Conversion) at
institution’s federal
www.ftc.gov/bcp/conline/pubs/credit/echeck.htm.
regulator, which is listed on
Page 7.
FDIC Consumer News
Summer 2004
4

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Kicking the Tires on an Auto Loan:
Don’t Kick Yourself for Paying Too Much
Buying a new vehicle is stressful
from all three companies. The costs of
enough without having to make a
these reports can vary, too. However,
decision about how to pay for it.
beginning December 1, 2004, in
Zero-percent financing, rebate offers
western states and moving east with
of thousands of dollars, small down
completion scheduled for September
payments, bank financing, dealer
1, 2005, you will be entitled to a free
financing — so many choices are
credit report annually under the
enough to make your head spin even
provisions of the new Fair and
before you’ve taken your dream
Accurate Credit Transactions Act.
purchase out for a spin. FDIC
on the vehicles within that range,” she
2. Shop for a loan before you visit a
Consumer News offers these tips to
says. “This also helps you avoid taking
dealership or bid for a car over the
help you save time and money when it
on more debt than you are
Internet. Contact your bank and
comes to shopping for an auto loan.
comfortable with in the long run.”
several other local lenders. Ask about
1. Review your credit report long
the loans they offer — the number of
Also consider getting pre-approved
before you intend to apply for a
months for which you can borrow, the
for a loan, meaning a lender evaluates
loan. A credit report is a summary of
interest rates being offered, whether
your creditworthiness and explains
your financial reliability — for the
there are penalties if you pay the loan
your loan options and likely costs
most part, your history of paying
off early, and so on. Ask about other
before you buy a car. “Getting pre-
debts and other bills — as compiled
options for financing the car.
approved doesn’t mean you have a
by a company called a credit bureau.
loan in hand but it does give you the
For example, some homeowners may
Why should you see your credit
benefit of knowing what you can
want to consider a home equity loan
report before applying for a car loan?
afford and what it will cost you in the
or line of credit instead of a
To correct any error before it slows
way of a loan,” Kincaid explains.
traditional auto loan. “A loan tied to
down your credit approval or prevents
“You’ll also know you won’t be
your home may be available with very
you from getting the best possible
surprised with news that you’ve been
attractive terms, and with recent gains
loan terms. “Erroneous information
denied credit or charged a higher rate
in the housing markets many folks
can cost you hundreds of dollars
due to your credit record.” (Consumer
have some built-up equity available to
because you could be disqualified
advocates also suggest that you not
use for a new car,” says Creamean. A
from the best financing terms
tell the dealer if you’ve been pre-
home equity loan also may come with
available,” says Joni Creamean, a
approved elsewhere for a loan until
tax benefits (but consult your tax
Senior Consumer Affairs Specialist
after you’ve negotiated the best price
advisor). Important to remember is
with the FDIC. “You will be
on a car. Some dealers may be less
that if you pledge your home as
considered a riskier borrower and
flexible on the price of the vehicle if
collateral for a loan, and you can’t
charged higher rates or be required to
it’s clear that the dealership won’t be
repay, you could lose your home.
provide a larger down payment.”
earning money on a loan.)
(For more information, see the new
Creamean adds that it could take
brochure published jointly by the
months to correct errors in your
After you know what’s available in the
FDIC and nine other federal agencies
credit history.
marketplace, including the interest
entitled Putting Your Home on the Loan
rates, consider learning what the
It’s also smart to review your credit
Line Is Risky Business, available on the
dealers are offering by reading their
report from each of the three major
FDIC’s Web site at www.fdic.gov/
advertisements, making phone calls or
credit bureaus that operate
consumers/consumer/index.html.)
checking the Internet. Find out if only
nationwide—Equifax
certain models are eligible for zero-
Janet Kincaid, FDIC Senior
(www.equifax.com), Experian
percent financing from the dealer or if
Consumer Affairs Officer, points to
(www.experian.com) and TransUnion
a manufacturer’s rebate isn’t available
yet another reason to shop for a loan
(www.transunion.com). Credit report
if you opt for zero-percent financing.
before you shop for a car: “Knowing
content may vary significantly among
Having this information helps you
what your spending limit is and
the credit bureaus, so that’s why
make a good decision about financing
sticking to it permits you to focus only
experts suggest you request copies
when you’re face-to-face with a sales
continued on next page
FDIC Consumer News
Summer 2004
5

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person or finance officer at the
might be trying to buy more car than
If you have a question or a concern
dealership. For example, “In some
you can really afford. Also, in the
about an auto loan and you can’t
situations, it may be best to accept
later years of the loan, you’ll still be
resolve the matter with the lender
the dealer’s rebate and pass up the
making payments on what is an older
or auto dealer directly, contact the
zero-percent financing in favor of a
vehicle that may have a lot of repair
appropriate federal regulator —
loan from a bank that does charge
and maintenance costs.”
one of the banking agencies listed
interest,” says Creamean. “You’ll have
on Page 7 if the situation involves a
Creamean also cautions that, in five
to do the math and decide what is
banking institution, or the Federal
or seven years, you may still owe
best for you.”
Trade Commission (toll-free 877-
more on the loan than the trade-in
382-4357 or www.ftc.gov) for a
3. Be careful figuring out how
value of the car, and that puts you in
nonbank lender, such as an auto
much to borrow and for how long.
a difficult financial position. “Just
dealer or finance company.
Of course, the dollar amount of your
when you need or want a new
loan largely will be determined by the
vehicle,” she says, “problems with
And for more information about
sale price of the vehicle minus your
your old car may require you to come
how to get a good auto loan, we
down payment, any rebates and the
up with extra cash to pay off the old
recommend the FTC Web site at
value of any trade-in. But there are
loan or you might have to roll the old
ww.ftc.gov/bcp/conline/
other costs that you should consider
loan into a new loan, which may push
edcams/automobiles/index.html,
when deciding how much of a car you
up your interest rate. It can become a
including the fact sheet
can afford and how much of a loan
vicious cycle.”
“Understanding Vehicle Financing.”
you need. Those costs include auto
4. Know what you are signing and
The bottom line: By being better
insurance, sales taxes, annual property
speak up if you think there’s a
informed about auto loans, we
taxes on the car (if any), and options
problem. A variety of laws provide
believe you’re more likely to drive
you may be inclined to buy, such as
consumer protections in the context
away happy with extra savings in your
an extended warranty. Also remember
of auto loans. Among them: the
bank account that can be used for
that every item you add to your loan
federal Truth in Lending Act, which
other things, such as gas money… or
instead of paying up-front will add to
requires lenders to disclose to
fuzzy dice.
the total cost of the loan because you
borrowers the terms of a loan
will be paying interest on the amount
(including the Annual Percentage
financed.
Rate and the total cost of the loan),
Reprints
After you determine how big a loan
and federal and state laws that
you need, try to pick a repayment
prohibit unfair or deceptive business
Starting with this edition, a
period that makes sense for you. For
practices. However, you have a
special online format
enables banks, educators,
example, a $15,000 loan at 4 percent
responsibility for protecting yourself,
consumer organizations or
interest for 36 months equals a
too.
anyone else to easily reprint
monthly payment of $443. Stretch
“One of the most important things a
FDIC Consumer News in
the same loan out to 48 months and
borrower can do is to carefully review
any quantity. A
the monthly payment drops to $339.
downloadable Portable
the loan document before signing it,
While it’s tempting to go with a
Document Format (PDF)
because this is a contract legally
longer loan to reduce your payment,
will be posted at
binding you to repay according to the
be careful. “Don’t make the common
www.fdic.gov/consumers/
terms of the document,” says FDIC
mistake of thinking only in terms of
consumer/news/index.html.
attorney Mark Mellon. While the
monthly payments rather than the
The PDF version looks just
Truth in Lending Act gives
total cost of the loan,” warns
like the printed newsletter
consumers the right to cancel certain
and can easily be reproduced
Creamean. “In the end, extending a
mortgage contracts up to three
using any printer. The PDF
loan term will cost you more since
business days after signing the
edition is in addition to the
you will be paying interest on the
contract, Mellon says, “there may or
existing online version that
loan another year or more.”
may not be a similar protection for
also allows for the copying
of text but does not have the
Creamean says to be especially
your auto loan depending on your
same look as the printed
cautious before taking an auto loan
circumstances and state law, so it’s
newsletter. FDIC Consumer
term of five years or more. “First,”
best to be comfortable with your
News may be reprinted in
she says, “if you have little cash for a
decision before you sign on the
whole or in part without
down payment and you have to take
dotted line.”
permission from the FDIC.
on a loan of five or seven years, you
FDIC Consumer News
Summer 2004
6

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The Federal Deposit Insurance
Corporation insures deposits at banks and
For More
FDIC
savings associations and supervises state-
Consumer News
chartered banks that are not members of the
Information
Federal Reserve System. The FDIC’s services
include a toll-free consumer assistance line,
Published by the Federal Deposit
answers to written questions, and
Insurance Corporation
informational material. Toll-free phone:
Donald E. Powell,
(877) ASK-FDIC or (877) 275-3342. The
Chairman
phone line is staffed Monday through Friday,
Elizabeth Ford, Assistant Director,
8:00 a.m. to 8:00 p.m., Eastern Time.
Office of Public Affairs (OPA)
Recorded information is available 24 hours a
Jay Rosenstein, Senior Writer-Editor,
day. The toll-free TTY number for the
OPA
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Public Affairs in cooperation with
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(listed below) insures deposits at federally insured credit unions.
a nontechnical way and is not
intended to be a legal interpretation
For other questions, including those about consumer protection laws, or
of FDIC regulations and policies.
complaints involving a specific institution: First attempt to resolve the matter
Mention of a product, service or
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company does not constitute an
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endorsement.
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Editor, FDIC Consumer News
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The Office of the Comptroller of the Currency charters and supervises national
Find current and past issues of FDIC
banks. (The word “National” appears in the name of a national bank, or the initials
Consumer News at www.fdic.gov/
“N. A.” follow its name.) Phone: (800) 613-6743. Fax: (713) 336-4301. Home Page:
consumers/consumer/news.
www.occ.treas.gov. E-mail: consumer.assistance@occ.treas.gov. Mail: Customer
To receive e-mail notification of new
Assistance Group, 1301 McKinney Street, Suite 3710, Houston, TX 77010.
issues posted to the FDIC Web site,
The Office of Thrift Supervision supervises federally and state-chartered savings
with links to stories, follow
associations plus federally chartered savings banks. (The names generally identify
instructions posted on
them as savings and loan associations, savings associations or savings banks. Federally
www.fdic.gov/about/subscriptions/
chartered savings associations have the word “Federal” or the initials “FSB” or “FA”
index.html.
in their names.) Phone: (800) 842-6929 or (202) 906-6237. Home Page:
Consumer information from the
www.ots.treas.gov. E-mail: consumer.complaint@ots.treas.gov. Mail: Consumer
FDIC is available at www.fdic.gov
Affairs Office, 1700 G Street, NW, Washington, DC 20552.
and from the FDIC Public
The National Credit Union Administration charters and supervises federal credit
Information Center,
unions, and insures deposits at federal credit unions and many state credit unions.
801 17th Street, NW, Room 100
Phone: (703) 518-6330. Fax: (703) 518-6409. Home Page: www.ncua.gov. E-mail:
Washington, DC 20434
pacamail@ncua.gov. Mail: Office of Public and Congressional Affairs, 1775 Duke
Toll-free phone: (877) 275-3342 or
Street, Alexandria, VA 22314.
(202) 416-6940 (Washington area)
E-mail: publicinfo@fdic.gov
Your state government also may offer assistance and publish useful information.
Fax: (202) 416-2076
Contact your state’s Attorney General’s office, consumer protection office or
financial institution regulatory agency as listed in your phone book or other
directories, or visit your state’s official Web site.
FDIC Consumer News
Summer 2004
7

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Insurance Publications
New Tax-Advantaged Savings Account for Medical Costs
Reminder: The FDIC has
You should expect to hear more
In general, to open an HSA you
issued two new publications to
about a new Health Savings
must be under age 65 and have a
help explain federal deposit
Account (HSA) that, for some
qualified health insurance plan that
insurance coverage. One
consumers, could mean big tax
has a deductible (i.e., amount you
brochure, Insuring Your Deposits,
breaks when used to save for
pay) of at least $1,000 (or $2,000
answers basic questions that
certain medical costs, including
for a family policy). Contributions
individuals and families most
doctor fees and long-term care
to HSAs are limited to the amount
frequently ask. The other
insurance payments. But not
of your annual deductible. For
publication, Your Insured
Deposits — FDIC’s Guide to
everyone is eligible to open an
more information, read IRS
Deposit Insurance Coverage, is a
HSA. Here’s a quick summary.
Bulletin No. 2004-2 online at
comprehensive guide to the
www.irs.gov/irb/2004-02_IRB,
You can set up an HSA at a bank
deposit insurance rules.
contact your local IRS office or
or other U.S. financial institution
consult your tax advisor.
You can read or download both
that offers these accounts.
new publications at
According to IRS rules, your
How does the FDIC insure these
www.fdic.gov/deposit/deposits
contributions are tax deductible
accounts? In general, an HSA
on the FDIC’s Web site. Single
and contributions made by your
deposit account at an insured
copies are available free of
employer may be excluded from
institution would be protected for
charge by completing the
your gross income. The money
up to $100,000 along with any
online order form at
can remain in the account for
deposits you hold in your name at
www2.fdic.gov/
depositinsuranceregister or
years and your earnings grow tax
the same institution — but there
by calling or writing the
free. Also, there is no tax on the
are exceptions. To learn more, call
FDIC’s Public Information
money you withdraw to pay for
or write the FDIC as listed on
Center (Page 7).
qualified medical expenses.
Page 7.
Penalty for Private Use, $300
BUSINESS
OFFICIAL
ashington, DC 20429-9990
W
Federal Deposit Insurance Corporation
Summer 2004

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