What is the purpose of FDIC insurance for bank customers?

The purpose of FDIC insurance for bank customers is to protect their deposits in the event that a bank goes out of business, with coverage up to $250,000 per depositor, per insured bank, for each account ownership category. This insurance is crucial because it provides a safety net for individuals and businesses, ensuring that they do not lose their hard-earned money due to a bank failure. The coverage amount was raised from $100,000 to $250,000 in 2008 to better protect consumers and reflect changes in the financial landscape.

This assurance encourages consumer confidence in the banking system, promoting savings and investment. While interest on savings accounts and loan guarantees are important components of banking services, they do not pertain to FDIC insurance's primary role, which is solely focused on safeguarding deposits.