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 deposits to other banks in the CDARS network so that no one bank holds over the maximum amount insured by the FDIC. The FDIC currently insures your deposits only up to $250,000 in deposits per ownership class at a single financial insitutions. This insurance covers all deposits (savings, checking accounts, etc.) in addition to CDs at that particular institution.
Insured Cash Sweep ®, CDARS ®, and IND ® deposit solutions are now named IntraFi SM Network Deposits SM and Promontory Interfinancial Network is now named IntraFi Network SM. By providing access to FDIC insurance, CDARS complies with investment policy mandates, reduces collateralization requirements, and enables you to devote more time to other activities in support of. CDARS ® is one of the safest and smartest investment vehicles for investors looking to protect their large-dollar investments while earning CD-level returns that may compare favorably to Treasury and money-market-fund yields. CDs placed through CDARS.
For the customer, this process is seamless.
Here's an example of how CDARS works:
- 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 distributed via the CDARS network. You agree and sign the consent form.
- After you make the deposit, the money is broken up into denominations of less than $250,000 (so that accrued interest is covered) and then distributed to other participating banks that are FDIC insured. Therefore, $2 million might be divided among 9 or 10 banks, instead of 8.
- Your money collects interest, and 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.
Is Cdars A Brokered Deposit Bankers Online
The Disadvantages of CDARS
Cdars Meaning
- Potentially lower rate. You will likely receive a much 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 may waive this fee for good customers, but you will likely be much better off unless you are super wealthy by dividing your money yourself among the leading CD rates on BestCashCow.
- 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.