CDARS - Certificate of Deposit Account Registry Service

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CDARS stands for Certificate of Deposit Account Registry Service. CDARS is a program that allows you to spread your money among various banks, usually to stay below FDIC insurance limits at any given bank. 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. However, there is a maximum dollar limit of $250,000 per depositor.

For most people, this is plenty, but some individuals and organizations want to keep more than $250,000 in the bank.

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 several 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 option can be complicated and time-consuming.

CDARS allows you to spread your money among various banks without doing all of the legwork yourself. Money is invested in certificates of deposit (CDs) ranging from one month to five years.

Using CDARS

Participating banks: to use CDARS, you’ll need to start with a bank that participates in the CDARS program. Many banks are part of the network, and you might already have a relationship with one of these banks.

Deposit funds: make a deposit into the CDARS program at your bank. You’ll need to use a separate Deposit Placement Agreement specific to CDARS. Your bank will then split 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 multiple accounts at multiple banks (with multiple logins and quarterly statements), you’ll get everything on a consolidated statement.

How much does it cost? As a consumer, you won’t pay fees directly to the CDARS service. Your bank pays to participate, so you’ll pay any fees typically charged by your bank. Ultimately, you’re paying 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. 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. Your money is as safe as it would be in any FDIC-insured institution – because the money sits in banks (CDARS does not take possession of any money). CDARS was created by former financial regulators and is run by Promontory Interfinancial Network, LLC.

Alternative Logistics

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

  1. Open individual accounts: go to each bank (or each bank’s website) and open an account. Be sure to keep your assets at each institution below $250,000 at all times – so don’t deposit the full $250,000 because the interest you earn will push your account above the limit.
  1. Brokered CDs: An alternative is to use brokered CDs inside of a single account. You’ll face other complications if you go this route, but you can keep everything on one statement (just like you could with CDARS).

If you do everything yourself, ensure that the banks you work with are FDIC insured. Check on each institution at FDIC.gov. You can also get the same government-backed protection at credit unions. NCUSIF insurance, which is equivalent to FDIC insurance, is administered by the National Credit Union Association. To verify coverage, visit NCUA.gov.