What Happens to Credit Card Debt if a Bank Fails?

If the bank fails, will my credit card survive?

The past month or so has seen several high-profile bank failures, as well as several others that pundits have expressed concern about. For everyday consumers, FDIC insurance ensures deposits of up to $250,000 per institution are safe. you Are you borrowing money from the bank with your credit card?

Simply put, you still owe money. But there is more to the story, and there is some uncertainty as to whether your credit card account will survive. Here’s what you can do.

you still owe the credit card balance

When a bank fails, it is managed by the Federal Deposit Insurance Corporation (FDIC). The FDIC hopes that the bank’s assets and deposits will be purchased by healthy banks as soon as possible, but if there are no buyers, an FDIC-controlled temporary bank will be established to ensure continuity of operations. can.

In either case, there are some important points to know.

• First and foremost you still owe moneyYour credit card balance won’t go away if your bank fails. The same applies to other loans in failed banks.
• Next, we will contact you in the next few weeks regarding future payments. If you do not hear from us within a reasonable period of time, contact the bank that acquired the failed bank. Or check the FDIC press release announcing the bank closure for information. For example, when Silicon Valley Bank collapsed, the FDIC press release stated that “loan customers should continue to make payments as normal.”
• Third, unless we notify you otherwise, your account will continue to exist and its terms will remain unchanged. The acquiring bank can certainly choose to close the credit card account, as we will see later in a practical example.

what happened in the past?

The largest bank failure in US history was the Washington Mutual in the middle of the September 2008 financial crisis. outstanding balance.

JPMorgan Chase acquired Washington Mutual, including its credit card portfolio, following its bankruptcy. As such, Washington Mutual customers became Chase credit card customers and paid accordingly.

However, JPMorgan Chase management felt the credit quality of Washington Mutual’s credit card portfolio was not high and initiated some changes. Some accounts were closed abruptly shortly after the bank was acquired, and other cardholders reported that the terms of their accounts (such as minimum payment requirements) had changed. Yes, even if your bank closes your credit account, you still owe money and must pay as agreed.

Conclusion

I’ve said it several times, but it’s worth repeating. If your bank fails, you still have outstanding balances on your credit cards and other loans. The only immediate change is the bank that owes the money.

That said, it’s entirely possible that your credit card account may be closed or your acquiring bank may change the terms of your account. We usually receive a fair amount of notice before the terms of an account change, but if the new bank decides to do so, account closure can take effect immediately. In the event of bankruptcy, pay close attention to any payment instructions from the FDIC or acquiring bank and be careful of any future account changes.