This may be the best savings account option for bank customers who were tired of having to deal with multiple banks so that all of their deposits would be insured.
From Minyanville.com
Here’s how CDARS works:
* You make deposits through a single member bank.
* Your funds are divided into CDs of less than $100,000 each to ensure that principal and interest receive full FDIC insurance coverage.
* The CDs are issued to member banks in the Promontory Interfinancial Network.
* When funds are sent out of one bank, an equal amount is sent to the originating bank from other members of the network. This keeps the entire amount of the deposit in the community of origin while assuring full FDIC coverage.
* A bank making CDARS transactions can select its own interest rate and therefore doesn’t have to pay an artificially high national brokered rate to attract new funds.
* The smart customer therefore shops around for the best rate.
* The customer deals with one bank, receives one monthly statement and earns a single interest rate.
In general, local or regional banks offer the CDARS program while major banks such as JP Morgan Chase (JPM), Wells Fargo (WFC) and Wachovia (WB) do not. The CDARS program is available through 1,650 banks in all 50 states and the District of Columbia – think Apple Bank for Savings, Security First Bank of North Dakota or Alaska First Bank & Trust.
The American Bankers Association has endorsed the product, saying “CDARS allows banks to offer customers security as well as the convenience of one-stop shopping. It’s good for banks, depositors and the economy.”
