CDARS: Overcoming The $100,000 FDIC Limit

I mentioned CDARS in my last post and wanted to follow up and explain it in a little more detail. If you have over $100,000 in a bank and you want want to be able to make sure it's FDIC insured, this is the program for you, here's how it works:

Mr. Jones has $180,000 he wants to put in a CD, but is now worried about banks failing and wants to make sure it's protected. He takes the money to Bank A and Bank A opens a CD for $90,000, leaving room for interest, and sends the remaining $90,000 to Promontory Interfinancial Network (PIN) which is a company that acts similar to a clearinghouse. PIN then uses that money to buy a CD from Bank B which will have the same yield as the first CD. It appears seamless to Mr. Jones, he has all his statements at one bank and has all of his money insured. Some fees may apply, so please check with your bank.

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