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CDARS - Certificate of Deposit Account Registry Service

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CDARS is a service provided by select banks that allows you as a depositor to get up to $50,000,000 in FDIC insurance for Certificates of Deposit.

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CDARS is a service provided by select banks that allows you as a depositor to get up to $50,000,000 in FDIC insurance for Certificates of Deposit. The system works by distributing your deposit to other banks in the CDARS network so that no one bank holds over the maximum amount insured by the FDIC. In the case of Certificates of Deposit that expire before December 31, 2009, that would be $250,000 per bank. The amount for a Certificate of Deposit that expires after that date would be $100,000.

For the customer, this process is seamless. Here's an example of how this would work:

  • You walk into your bank with $2,000,000 you want to deposit into a 3 year CD.
  • They quote you a rate and tell you it will be distributes via the CDARS network. You agree and sign the consent form.
  • After you make the deposit, the money is broken up into denominatins of less than $100,000 (it has to be less to allow for interest) and then distributed to other participating banks that are FDIC insured. Let's assume it is broken into $90,000 denominations and it is sent to 23 different banks.
  • Your money collects interest, is fully FDIC protected. You receive a statement from the original bank where you made the deposit.
  • When your CD expires, you can go to the original bank and withdraw the full amount or roll the money over for another period.

The Benefits of CDARS

  • Up to $50,000,000 in FDIC insurance. Using CDARS you can insure up to $50,000,000 with the FDIC.
  • One Bank . There is no longer any need to run around to different banks opening accounts to ensure your money is fully FDIC insured.
  • One Statement. You receive one statement from the original bank.
  • One Rate. You receive one rate regardless of how many banks are used to insure your money.

The Disadvantages of CDARS

  • Potentially lower rate. You may receive a lower rate because CDARS charges banks a transaction fee. Banks often pass this fee on to their customers in the form of a lower rate. Banks will waive this fee for good customers.
  • Lack of Certainty. You do not get to choose which banks your funds are sent to nor do you even know. The only thing you do know is that every bank that accepts your deposits will be FDIC insured.

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