Is Relay FDIC Insured? How Your Deposits Get Coverage

Relay is a financial technology company offering business banking solutions for entrepreneurs and small business owners. It provides a platform for managing business checking and savings accounts, integrating with various accounting software and payment processors. This article clarifies whether funds held through Relay are protected by the Federal Deposit Insurance Corporation (FDIC) and explains how this coverage is achieved.

Relay’s FDIC Insurance Coverage

Relay operates as a financial technology company, not holding a banking charter itself. It partners with FDIC-insured financial institutions to provide banking services. Relay’s primary banking partner is Thread Bank, a member of the FDIC. This partnership ensures funds deposited through the Relay platform are held at an FDIC-insured institution, making them eligible for federal deposit insurance.

Funds deposited by Relay users are FDIC insured. Relay implements a cash sweep program to provide extended FDIC coverage beyond the standard $250,000 limit per depositor, per insured bank. Through this program, deposits can qualify for up to $3 million in FDIC insurance. This enhanced coverage is achieved by distributing larger balances across a network of multiple FDIC-insured banks.

When a business deposits funds with Relay, amounts exceeding $250,000 are automatically swept into accounts at various partner banks. Each bank then insures the portion of the deposit it holds, up to the $250,000 limit. This strategic distribution effectively multiplies the total insurance coverage available to the depositor. For the user, this process is seamless, maintaining full liquidity of their entire balance.

Relay’s business checking and savings accounts are covered by this insurance mechanism. The sweep program ensures that while the user interacts with Relay’s interface, the underlying funds are securely held and insured by chartered banks. This model provides security for business deposits, mitigating the risk of holding substantial cash in a single institution.

Understanding FDIC Deposit Insurance

The Federal Deposit Insurance Corporation (FDIC) is an independent U.S. government agency. Its primary purpose is to maintain stability and public confidence in the nation’s financial system by insuring deposits in commercial banks and savings institutions. Since its inception, no depositor has lost FDIC-insured funds due to a bank failure.

The standard insurance amount provided by the FDIC is $250,000 per depositor, per insured bank, for each account ownership category. All deposits an individual holds in the same ownership category at a single FDIC-insured bank are aggregated and insured up to this limit. Deposits in different branches of the same bank are not separately insured.

FDIC insurance covers various deposit accounts, including checking accounts, savings accounts, money market deposit accounts (MMDAs), and Certificates of Deposit (CDs). This coverage is automatic for eligible accounts opened at an FDIC-insured institution.

To provide additional coverage beyond the standard limit at a single institution, the FDIC recognizes different ownership capacities. These categories include single accounts, joint accounts, retirement accounts like IRAs, revocable trust accounts, irrevocable trust accounts, employee benefit plan accounts, and accounts held by corporations, partnerships, or unincorporated associations. Funds held in different ownership categories at the same bank can qualify for separate insurance coverage.

FDIC insurance does not cover all financial products or investments. Products such as stocks, bonds, mutual funds, annuities, life insurance policies, and cryptocurrency are not insured by the FDIC. These products carry investment risks and are not considered deposits.

Applying FDIC Rules to Your Accounts

Understanding how FDIC rules apply to business accounts, particularly within a multi-bank framework, is important for businesses managing substantial funds. For a single business entity, identified by its Employer Identification Number (EIN), all deposit accounts held at one FDIC-insured bank are aggregated under the “corporation, partnership, or unincorporated association” ownership category. The total balance across all checking, savings, and other deposit accounts held by that single business at that specific bank is insured up to the $250,000 limit.

Platforms like Relay leverage this by distributing a business’s funds across multiple FDIC-insured partner banks through a sweep program. For instance, if a business has $750,000 in liquid assets, Relay’s system can automatically allocate $250,000 to three different partner banks. Since each bank is a separate insured institution, the full $750,000 would be protected, as each $250,000 segment falls within the standard FDIC limit at its respective bank. This extends total FDIC coverage beyond what a single bank can provide.

Businesses structured as different legal entities, even if owned by the same individual, can qualify for separate FDIC coverage. For example, a sole proprietorship, a Limited Liability Company (LLC), or a separate corporation, each with its own EIN, would be treated as distinct depositors. If these separate entities hold funds at different FDIC-insured banks, each entity’s deposits would be insured up to $250,000 at each respective bank. This allows for additional coverage if accounts are structured across different legal entities and financial institutions.

Depositors can verify their coverage by understanding which partner banks hold their funds and the aggregate balance at each. While a financial platform may provide a unified interface, the underlying principle of FDIC insurance remains tied to the individual insured banks. The $250,000 limit applies per insured bank, not per financial platform. This distinction is crucial for businesses seeking to maximize their deposit insurance protection.