There are deposit insurance schemes for cases where a bank goes bankrupt. However, none of these schemes has enough funds for the case of even a medium-sized bank failing. It's possible that there will be legislation for other banks that didn't go bankrupt to pay the missing insurance funds, but that's not guaranteed. Where I live, there is a limit for deposit insurance, and the limit is per-(depositer,bank). So you can deposit the limited amount to let's say 5 banks each, and you have increased the total limit five-fold. Check the local laws where you live, and consider also that enough funds to pay the insured amount don't exists so the entire system is on very shaky ground.
For having a huge amount of money as cash, there are three feasible options:
- Put all of it into a money market fund of the local currency. Since this is not a deposit, it's not guaranteed by deposit insurance schemes. However, most likely cases for preventing a big bank crisis will save all banks except maybe one that is in huge troubles, so big troubles it isn't worth saving. A true money market fund has diversified its money market instruments, so if one bank fails it will lose maybe 10% of its value (and that happens only in a really really big crisis). Also a true money market fund has short maturity on all its instruments (let's say average maturity of 3 months), so some cases of banks going bankrupt happen in the following way: (1) bank goes into trouble, (2) bank goes bankrupt, and if the difference between (1) and (2) is more than 3 months, the money market fund would have to do a decision to reinvest into instruments of a troubled bank which it obviously won't do. Due to short duration of the instruments, its value doesn't fluctuate with interest rates. Never ever use a "short interest" fund that isn't true money market fund: they often invest in variable-rate instruments (short duration, long maturity), commercial papers, etc. to have maybe 0.1% more annual yield in good times, but reduce in value 10-30% in bad times easily.
- Fund investing in short-term government bonds in the local currency. The shoter the term, the less the value of the fund varies with fluctuating interest rates. A normal government bond fund can easily decrease 10% even 15% in value during times where interest rates increase. Usually governments don't go bankrupt.
- Multiple accounts in different banks. The idea is to diversify, so if one bank goes bankrupt, you still have the other accounts. Also in some countries this increases the maximum limit for the deposit insurance, so if you believe in the usefulness and credibility of the deposit insurance scheme, this can be very useful.
If you choose bank accounts, always use accounts not connected to a debit card. If you have a debit card on one account on one bank, open a different account on the same bank and use that for part of the large sum of money (with rest being in other banks of course). Also carefully guard your online banking credentials.
Credit card theft isn't usually a consideration since if you didn't make a payment, you can usually dispute it without having to pay it. Also the credit limit usually is very low and applies for the whole month, unlike debit card limits which usually are per-day and can be quite large indeed.
If you don't believe in deposit insurance, or if your amount deposited is orders of magnitude above the insurance amount, my suggestion would be either fund (1) or fund (2).
If you aren't scared by daily fluctuations of value and the threat of your investment temporarily (for a period of 5 years let's say) decreasing in value at most 15%, then you can consider a normal government bond fund too.
Funds aren't something to be concerned about. If the fund maintainer goes bankrupt, they money is still there, and either a new maintainer takes over the fund, or the money will be delivered back to investors. In countries having a well-regulated financial sector, funds are usually as safe as the investments the fund makes are. About the only problem with funds is that some have high fees. Check the fees before investing.