CDARS is an acronym for Certificate of Deposit Account Registry Service. CDARS is a deposit placement service offered through the Promontory Interfinancial Network. The real value and potential benefit with CDARS is the extended FDIC coverage for large CD holdings.

When a bank places a customer’s large deposit using the CDARS service, that deposit is broken into amounts under $100,000 (making the full amount eligible for FDIC insurance coverage) and is spread out among other members of the Network. Your large deposit is broken into smaller amounts and placed with other banks that are members of this network. Then, those member banks issue CDs in amounts under $100,000, so that your entire investment is eligible for FDIC insurance. By working with just one bank where you make the initial CD purchase, you can receive insurance from many. For the bank that is a member of the network, when funds are sent out of the one bank, an equal amount is sent to the originating bank from other members of the network.

The customer deals with one bank, receives one monthly statement and earns a single interest rate. You earn one rate on your entire investment so you can forget about multiple rate negotiations and the need to consolidate multiple disbursement checks. You receive one regular account statement listing all of your CDs, along with their issuing banks, maturity dates, interest earned, and other details.

One drawback to the convenience of CDARS is that you can miss out on higher CD rates offered by banks other than your own. A bank making CDARS transactions can select its own interest rate. CDARS interest rates are a little bit less than those offered by banks with the best CD rates. You’re going to pay a little something for that.

Consumer who are willing to do a little extra research and stay abreast of the market will almost always receive a higher rate CD than those offered through CDARS. For large dollar CDs you may have to spread your funds out to different banks but the value of FDIC insurance still holds and the returns afforded by the best CD rates makes the extra work well worth it. The smart customer therefore shops around for the best CD rate period.

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