CDARS: A Tool for Diversifying Your Savings
CDARS offers a streamlined way to spread the money across certificates of deposit at multiple partner banks.
In case your financial institution goes belly-up, it's important to make sure that all the deposits you have there are federally insured against bank failure. Generally, deposit-account balances receive Federal Deposit Insurance Corp. coverage of $250,000 per depositor, per bank. That includes your combined balances in checking accounts, savings accounts, money market accounts and certificates of deposit. (For more information on FDIC coverage, go to the FDIC site)
If the amount of savings that you'd like to park in a safe place exceeds FDIC limits, one solution is to use a service known as CDARS. Operated by financial-technology company IntraFi, CDARS offers a streamlined way to spread the money across certificates of deposit at multiple partner banks, preserving deposit insurance on the full balance.
If you want to save $1 million in CDs, for example, CDARS could split it into four deposits of $250,000, with each going to a different member bank.
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And you can compare the best CD rates using this Bankrate tool:
As a depositor, you choose one participating institution that places your money for you; search for one at Intrafi. You'll receive a consolidated statement detailing all your deposits, and you'll earn a single interest rate on each CD maturity, set by the bank you're working with.
Recently, for example, CDARS rates from online bank Everbank included 3.05% on a three-month term and 3.57% on a two-year term.
If you'd rather not lock your money into CDs — especially given the likelihood that interest rates will rise in coming months — consider ICS, another service from IntraFi.
With ICS, your money is spread in increments of no more than $250,000 across money market deposit accounts, allowing you to take out your funds at any time without facing early-withdrawal penalties. As with CDARS, you have a relationship with one participating institution that divides up the funds.
Use this Bankrate tool to find and compare some of the best money market and high-yield savings accounts:
Note: This item first appeared in Kiplinger Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.
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