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CDARS: Seeing the Forest for the Trees


Smart use of the CDARS program means no more tedious, wailing newspaper stories about Granny losing her life savings when the Bank of Cowflop fails.


Hey, Big Saver, it's now possible to receive up to $30 mln in Federal Deposit Insurance Corp. coverage through multiple CDs at one bank.

The Certificate of Deposit Account Registry Service – CDARS, or "cedars", like the trees – saves running around town and dealing with several banks to keep your CDs below the $100,000 threshold for FDIC coverage. Through the program, your funds are split into amounts below the FDIC limit and divided among member banks to ensure full coverage.

CDARS is a deposit placement service offered through the Promontory Interfinancial Network. It's designed to help community and regional banks attract and retain large deposits.

Here's how CDARS works:

  • You make deposits through a single member bank.

  • Your funds are divided into CDs of less than $100,000 each to ensure that principal and interest receive full FDIC insurance coverage.

  • The CDs are issued to member banks in the Promontory Interfinancial Network.

  • When funds are sent out of one bank, an equal amount is sent to the originating bank from other members of the network. This keeps the entire amount of the deposit in the community of origin while assuring full FDIC coverage.

  • A bank making CDARS transactions can select its own interest rate and therefore doesn't have to pay an artificially high national brokered rate to attract new funds.

  • The smart customer therefore shops around for the best rate.

  • The customer deals with one bank, receives one monthly statement and earns a single interest rate.

In general, local or regional banks offer the CDARS program while major banks such as JP Morgan Chase (JPM), Wells Fargo (WFC) and Wachovia (WB) do not. The CDARS program is available through 1,650 banks in all 50 states and the District of Columbia – think Apple Bank for Savings, Security First Bank of North Dakota or Alaska First Bank & Trust.

The American Bankers Association has endorsed the product, saying "CDARS allows banks to offer customers security as well as the convenience of one-stop shopping. It's good for banks, depositors and the economy."

The Promontory Interfinanical Network was established in 2002. Chairman and CEO Eugene A. Ludwig served as former comptroller of the currency. Vice Chairman Alan S. Blinder served as former vice chairman of the Federal Reserve's board of governors. President and Chief Operating Officer Mark Jacobsen served as the chief of staff at the FDIC.

The downside? Smart use of the CDARS program means no more tedious, wailing newspaper stories about Granny losing her life savings when the Bank of Cowflop fails. Think what that will do to your local rag's circulation. Oh, wait.

Click here to see a slideshow of expert tips and facts about the CDARS program!

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