Download FDIC Limit Raised

USB Compliance Times
October 2008
Volume 8, Number 1
In This Issue
 FDIC Limit Raised
 Vendors Are Offering
Creative Programs
FDIC Limit Raised
At least thirteen federally insured banks and savings and loan institutions have
failed so far in 2008. The overall economic landscape looks rocky, and there may
be more bank failures.
In early October the Federal Deposit Insurance Corp. (FDIC) formally approved
increasing the insurance limit to $250,000 per regular account. This move was part
of the financial rescue legislation recently enacted. This increase is temporary and
extends through 2009. This increase also provides for a $200,000 ceiling per coowner of joint accounts. The limit for retirement accounts held in banks remains at
$250,000.
Therefore, QSSBs can maintain up to $250,000 in a FDIC insured institution and
be within the USDA investment guidelines. Remember that this limit is for all
accounts owned by an entity or person held in the institution and not for each
account in the institution. These are unique times and it is important that a
depositor regularly visit with its bank and ask tough questions about its solvency.
The FDIC never releases its rating on the safety and soundness of banks to the
public. There are, however, some private companies that provide their own ratings
on banking institutions. To find out more about these services go to the FDIC link:
http://www.fdic.gov/bank/individual/bank/index.html .
Vendors Are Offering Creative Programs
Zigco Services, Inc.
Darold Ziegler
73 S. Laura Lane
Casa Grande, Az 85294
Ph: 520.423.2030
Fax: 520.423.2293
[email protected]
The news media is packed daily with information about the state of the economy.
Businesses are reacting to the economic downturn by finding traditional ways to
become lean-and-mean with employee cuts and closing marginal or unprofitable
operations. In addition to those traditional techniques, businesses are initiating
creative ways to increase customers spending and retain or add to their customer
base.
Some vendors are offering discounts on services/products if you pre-pay for them.
In other words, you advance them money. Significant savings can be achieved by
participating in such programs, but there may significant risk as well. One example
of such a program is advancing money by depositing funds onto an electronic
credit card specific to that company. Purchases made with the card are then
discounted, and the amount is deducted from the card balance.
There are some vendors such as airlines that are offering significant airfare
discounts and other benefits such as double mileage points if you pre-pay. Some of
these programs require thousands and perhaps tens of thousands of dollars to enter
into the program.
Participating in these kinds of programs is compliant as long as the pre-payment is
not viewed in any way as an investment. If interest or earnings is generated, then
the program would not be compliant if it doesn’t meet the USDA investment
guidelines. In addition, the services/product purchased must be compliant with the
Act and Order.
Here are some things to consider before participating in such programs:
 Does the discount save more than if the money was invested?
 How stable is the company that is offering the service?
 What happens to the prepaid balance if the company goes bankrupt or
out of business?
 Can you have the unused balance returned to you at any time? If so,
under what conditions? Is there a penalty?
Companies make these offers for two primary reasons: to use your money and
retain or add customers. It is important to get all commitments in writing and look
over the fine print very carefully. Savings may be available, but remember the
situation needs to be safe.