Expanding FDIC insurance past usual limits

December 3, 2008 7:14:04 PM PST
FDIC insures bank accounts up to $100,000, and through next year $250,000. But what if you have more than that? 7 On Your Side has found a way around those limits.

As more and more retires leave work with 401Ks, rather than defined benefit plans, this is becoming a common problem. There is a solution, even if you have a million dollars where you can get it all insured using just one bank account at just one bank.

Robert Padilla is a customer with Mission National Bank in San Francisco. He is a member of the Greater Mission Rotary Club and helps look after the club's bank account.

"We have some money in this bank and it was time to make some changes, because of the insurance," said Padilla.

He was going to set up a second account at another bank, so the club's money would not rise above $100,000. When the bank heard about the move, the bank's president and CEO, Dave Joves, told Robert about CDARS.

"CDARS stands for Certificate of Deposit Account Registry System," said Joves.

CDARS is a network of banks that work together to provide FDIC insurance beyond the usual limits.

"If I have a depositor that comes in and brings in a million dollars and wants to insure that all those deposits are under the FDIC insurance, what we will do is we will place them in the CDARS network," said Joves. "We will keep about $100,000 of that within Mission National and then disperse that through the network and those funds will find their way to nine other institutions."

All 10 accounts insured by the FDIC, but the customer only deals with one bank and one account, and there is no cost to the customer.

"By the time we came here we had done a bit of work, and like I say, we were ready to move it out. But when he assured us that that money would be insured, that's all we care. We had a decent rate of interest, so," said Padilla.

Although banks of different sizes are in the CDARS network, generally it is the small community-based banks that choose to be members.

For more information about CDARS, visit www.cdars.com.


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