A reader named Pat emails me with a question that’s timely, given the current bidding war for bank deposits:

Would you consider doing a column on what considerations the average person should use in deciding where to purchase CDs and money market accounts?   While these accounts are FDIC insured, I’m growing concerned about the safety of some of the financial institutions (i.e., Countrywide Bank — which is offering a high CD rate).   What would happen if these institutions started to go bad and the FDIC had to make payments to account holders?  

I can answer out of personal experience — I was a customer of   NetBank, an online bank that failed last year. Here’s what I told Pat:

My advice is simple. If you have less than $100,000 (or $250,000 for an IRA), you’re covered by federal deposit insurance, so you don’t need to worry about whether the bank is solvent. If you have more than that, you should worry very much about an institution like Countrywide. In fact, I wouldn’t recommend keeping an uninsured deposit in any bank.

I’ve actually been through the process — I had an account in a bank that failed — and I can report that it went smoothly. In most cases, another bank takes over the failed institution’s insured deposits and you wind up with an account under the new bank’s terms and conditions.