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Sweet Smell of CDARS


FDIC insurance available up to $50 million.


Hey, Big Saver, it's now possible to receive up to $50 million in FDIC coverage through multiple CDs handled 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 JPMorgan Chase (JPM), Wells Fargo (WFC) and Wachovia (WB) do not. The CDARS program is available through about 2,000 banks in all 50 states and the District of Columbia – think Apple Bank for Savings in New York, Bank of Houston or Northrim Bank in Anchorage, Alaska.

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."

Putting your money in a CDARS account means you won't have to spend the night outside your bank to get your money out like those who lined up outside IndyMac (IMB).

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