CDARS: Certificate of Deposit Account Registry Service

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CDARS stands for Certificate of Deposit Account Registry Service. This program allows you to spread your money into CDs of various banks, usually with the goal of staying below FDIC insurance limits at any particular bank. But instead of opening accounts at each bank individually, you can open a single account and use the CDARS service to manage your funds.

CDARS is a way to have somebody else manage the risk of bank failures for you.

FDIC Limits

FDIC insurance is a government-backed program that protects your bank deposits against bank failures. However, there is a maximum dollar limit of $250,000 per depositor per institution. For most people, this is plenty, but some individuals and organizations want to keep more than $250,000 in fully-insured CDs.

If you have more than the maximum coverage limit, you have two choices:

  1. Take the risk that your bank will fail and hope that your uninsured deposits will not be lost.
  2. Spread your money among multiple FDIC-insured banks so that you stay below the limit at each institution.

The first option is too risky for most people, and the second approach can be complicated and time-consuming.

CDARS allows you to spread your money among various banks without doing all of the legwork yourself. Your funds go into certificates of deposit (CDs) with maturities ranging from one month to five years.

The CDARS service promises simplicity: You work with one bank, you get one rate for each maturity, and you can view all of your CDs on one statement.

Using CDARS

Participating Banks

To use CDARS, you need to work with a bank that participates in the CDARS program. Thousands of banks are part of the network, and you might already have a relationship with one of these banks. Start by asking local banks in your area if they participate in the CDARS network.

Deposit Funds

Start by completing a Deposit Placement Agreement specific to CDARS through your bank. Then, you can deposit funds. Your bank will spread the funds among other member banks, keeping funds at each institution below the maximum FDIC insurance limit.

Track Your Funds

CDARS boasts that the program offers one statement. Instead of keeping track of multiple accounts at multiple banks (with all of the associated passwords and quarterly statements), you’ll get everything on one consolidated statement.

How Much Does It Cost?

As a consumer, you don't pay fees directly to the CDARS service. You pay no subscription, transaction, or other fees for the basic service of distributing your money among member banks. Ultimately, you pay for the service in the form of a CD rate (the APY) that might be lower than you can find if you shop around for the highest rates on your own. What you get in return is a simple way to keep your money safe.

Is CDARS Safe?

CDARS is a legitimate service that has been in existence since 2003. The service was created by former financial regulators and is run by Promontory Interfinancial Network, LLC. Your money is as safe as it would be in any FDIC-insured institution. Your money goes directly to member banks, and Promontory does not take possession of any money.

Alternative Logistics

If you don’t want to use CDARS for any reason, you can spread your funds among various FDIC-insured banks on your own. There are at least two ways to pull this off:

Open Individual Accounts

Go to each bank (or use the bank’s app or website) and open an account. Be sure to keep your assets at each institution below $250,000 at all times. It's best to avoid depositing the full $250,000 because interest earnings will eventually push your account above the limit.

Brokered CDs

An alternative is to use brokered CDs inside of a single account. For example, you might be able to purchase CDs from a variety of banks inside of a brokerage account or by using a financial advisor. You may face other complications if you go this route, but you can keep everything on one statement (just like you could with CDARS).

Other Types of Accounts

Some accounts, such as cash management accounts at brokerage houses, spread your cash among multiple banks. That money might not be in CDs, but if you want liquidity, this approach may be acceptable.

Before you use CDARS, make sure you really need to. Your FDIC coverage may be higher than $250,000 at a single bank due to how your accounts are structured. For example, joint accounts might enjoy more than $250,000 in total coverage. Trust accounts with multiple beneficiaries can also have higher coverage within a single institution. Ask your banker for details and verify the numbers with the FDIC's insurance estimator.

If you do everything by yourself, verify that the banks you work with are FDIC insured. To do so, research each institution at FDIC.gov. You can also get an equivalent level of protection at federally-insured credit unions. NCUSIF insurance, which is equivalent to FDIC insurance, is administered by the National Credit Union Association and backed by the U.S. government. To verify coverage, visit NCUA.gov. 

Article Sources

  1. Promontory Interfinancial Network, LLC. "CDARS – The Certificate of Deposit Account Registry Service." Accessed Sept. 8, 2020.

  2. Federal Deposit Insurance Corporation. "FDIC: Deposit Insurance FAQs." Accessed Sept. 8, 2020.

  3. Promontory Interfinancial Network, LLC. "Where to Find CDARS." Accessed Sept. 8, 2020.

  4. Promontory Interfinancial Network, LLC. "How CDARS Works." Accessed Sept. 8, 2020.

  5. Promontory Interfinancial Network, LLC. "Why CDARS." Accessed Sept. 8, 2020.

  6. Promontory Interfinancial Network, LLC. "Company History." Accessed Sept. 8, 2020.

  7. National Credit Union Administration. "Share Insurance Fund Overview." Accessed Sept. 8, 2020.