You read the title right. When you’re a high roller, the $250,000 limit of FDIC insurance just isn’t going to cut it. Let me show you how you can get $50 million. It’s all about rocking the CDARS.
Right now, your funds at an FDIC insured bank are insured up to $250,000. If the bank fails, your funds are protected under the Federal Depository Insurance Corporation up to $250,000. There are circumstances where your coverage could higher (it’s $500,000 if it’s a joint account) but the rule of thumb is that each account at each bank is covered up to $250,000.
What if you have more? The easiest way is to open up a new account at every local bank and depositing $250,000 into each. If you don’t mind all the paperwork, go right ahead. If you don’t want to deal with all the hassle, consider participating in the CDARS program. CDARS stands for Certificate of Deposit Account Registry Service and handles the paperwork and hassle of opening accounts at multiple banks to take advantage of the $250,000 protection limit.
How much does it cost? 0.15% is shaved off the interest rate of each of the CDs they use and used to pay for this service. So if you opted to put your funds into a dozen CDs yielding 2.00%, then CDARS would set it up for you, taking 0.15%, and leaving you with a yield of 1.85%. While 0.15% sounds expensive, your real cost is less than that because your earnings would’ve been taxed. Either way, it’s easier to have them do it.
How do you get in on CDARS? Simply go to a bank that participates and ask them to help you sign up. There are about 3,000 financial institutions participating in CDARS so you’ll likely find one near you. You can use their CDARS locator to find one near you.
Now the hard part is remembering where I put that $50 million.
Jim writes regularly about personal finance at Bargaineering.com.
(Photo: goldenpeacock)
Commenter Mr.Compliance addss:
First, the FDIC limits of $250K are only good until the end of this year. Jan 1 2010 they go back to $100K, so make sure they’re short term CDs.
Second, the CDARS product is not offered by a bank, they are offered by an LLC that keeps track of your holdings for you (a custodian of the holdings). This LLC is not a bank and is not FDIC insured.
Third, these CDs are likely called brokered deposits, which have higher rates than the bank up the road. These products have come under fire as of late because of the cost to financial institutions.
Lastly, you still need to track your CDARs portfolio your other bank accounts – checking, savings, other CD accounts, etc… Depending on the account registration, with CDARS you could be over the FDIC limit if you hold a CD within the portfolio when you take into account ALL your holdings at that financial institution. Make sure you know how the FDIC insurance limits apply to all your accounts.
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What about tax free Insured Municipal bonds. Municipalities generally don’t go bankrupt on their bonds and we’ve shown that no matter how stupid the insurers are the tax payers will cover it.
First, the FDIC limits of $250K are only good until the end of this year. Jan 1 2010 they go back to $100K, so make sure they’re short term CDs.
Second, the CDARS product is not offered by a bank, they are offered by an LLC that keeps track of your holdings for you (a custodian of the holdings). This LLC is not a bank and is not FDIC insured.
Third, these CDs are likely called brokered deposits, which have higher rates than the bank up the road. These products have come under fire as of late because of the cost to financial institutions.
Lastly, you still need to track your CDARs portfolio your other bank accounts – checking, savings, other CD accounts, etc… Depending on the account registration, with CDARS you could be over the FDIC limit if you hold a CD within the portfolio when you take into account ALL your holdings at that financial institution. Make sure you know how the FDIC insurance limits apply to all your accounts.
$50,000,000 * 0.15% = $75,000
For $35,000 I can hire an accounting student full time to take care of my accounts for me. This will give the student relevent experience, pay for his school and save me $40,000 a year.
He may even give me insider information or tips later on in his career as a way of saying thank you.
@Blueskylaw: You can also lose it all when your student gets all Madoff on your accounts.
@yasth: Who’s to say this LLC that’s offering the CDARS product won’t do it themselves?
On a TOTALLY unrelated subject, does anyone know if AIG offers CDARS or handles its insurance claims?
If I had the money, I’d invest in a white board, and keep track of where my money is that way. Seems a little cheaper, and possibly more impressive if you bring a lady over.
@AfraidOfVelcro_GitEmSteveDave: until she finds out about all the other ladies you have been impressing with your “wealth board” and erases it
This reminds me of another site that offers higher savings rates and they say to “trust us”. That business claims to deposit funds in a FDIC insured bank so everything is safe and secure, but in the end your relationship is NOT with a bank that is FDIC insured. Could the company just move the money off-shore and disappear? Yes.
White board – NICE!
Just use Treasury bonds or T-bills if you really need government insurance on that much cash.
I would think, after AIG, that people would steer clear of third party financial insurance.
Some people might tell you that buying gold is the best way to insure your cash. Those people are lying to you They probably voted for Ron Paul too, and think the world is controlled by the Illuminati and the Freemasons, so you probably shouldn’t be taking financial advice from them anyway, but that’s neither here nor there.
What you should do is sink all your cash into coke. I’m talking pure, top of the shelf, Columbian white gold here folks. This stuff is always gonna be in demand, and even if the global economy completely crashes and burns and we revert to the barter system, you’ll still be able to afford a couple of castles with $50 mil worth of coke.
And if you want to impress a lady, well, few things are gonna work like two huge mounds of coke on your desk, Tony Montana style. It’s a win win situation.
@YOXIM: I suggest keeping 50% of your portfolio in crack form in order to maintain liquidity.
@YOXIM: Whats your opinion on meth futures?
FDIC is doomed anyway.
I handle the CDARS accounts at the FI I work for. It’s generally a very short term investment.
Important Info! for when that lottery ticket hits. LOL!
Why would need (or want) to have that much in cash. I mean, I know that mortgages on mansion made of solid gold can be expensive, but seriously, once you get that kind of cash, you’d be better off putting the rest in something higher-yield, like stocks.