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How to Beat the $100,000 FDIC Limit?

Contributed by mm | August 18, 2004 10:49 AM PST

Most people know the principal deposited into a financial institution is safe as long as it is FDIC-insured. Why? FDIC, or Federal Deposit Insurance Corporation, is a government agency that is "backed by the full faith and credit of the United States government." It protects consumers against loss of deposits if an FDIC-insured bank fails, generally up to a limit of $100,000 per depositor per insured bank.

For most people (including me), the $100,000 limit is enough. After all, if your have more than this amount of your disposal, you should seriously consider move some of the money to work in better ways than saving accounts or money market accounts. Equity or fixed investment can be potential options.

However, if you do want to keep more than $100,000 in cash, you can still get FDIC insurance if you use some workarounds.

First, a no-brainer one: you can deposit your money to a number of banks, and keep your balance below $100,000 in each bank. Granted it will take you some more time to manage money in different accounts in different banks, but with the prolification of online banking, it is not that difficult.

Second, according to FDIC, you can open multiple accounts in different "ownership categories" and as long as your balance in each ownership category is under $100,000, all your money is insured. FDIC mentioned the common ownership categories include single accounts, joint accounts, self-directed retirement accounts (traditional and Roth IRAs, SEPs) and revocable trust accounts.

Third, you may leverage a new type of product, Certificate of Deposit Account Registry Service (CDARS). You only need to work with one bank and can deposit up to $5 million and still receive FDIC guarantee. How it works? CDARS helps you to redeposit the money to other banks in the same network, essentially distributing your wealth to lots of accounts, each under the gold $100,000 mark. (What's more, this process is transparent to you, and you still receive the same interest rate from the only bank you deal with for the entire amount.) As you can imagine, because banks perform the extra legwork for you in the process, you probably will need to sacrifice some interest income. (See this BankRate article for more details.) If you want to try this out, check out the participating banks by state here.

(Hopefully, I can find the practical use of such knowledge soon -- when I need to decide how to deposit more than $100,000 in cash. But before that, let me keep saving the next dollar :-))

This Post Has Received 10 Comments. Share Your Opinions Too.


Bill Commented on August 18, 2004

Certain large banks that offer wealth management services operating as one entity encompassing several banks can help you get past the $100k limit. For instance, with a Merrill Lynch CMA account, you get $200k FDIC insurance (2 banks), and with Citi/Smith Barney's FMA account, you get $1M FDIC insurance (10 banks).


mm Commented on August 18, 2004

Isn't it the same arrangement as CDARS which was discussed in the article?


Bill Commented on August 19, 2004


It may be similar in execution, but it is seamless to the customer. It seems that Citi / Smith Barney have another program which is similar to CDARS. Here are a couple of URLs:

http://www.smithbarney.com/products_services/fma/bdaintro1.html
http://www.smithbarney.com/products_services/fma/ida.html


mm Commented on August 19, 2004

Thank you for sharing!


Marie O Commented on July 8, 2005

It automatically doubles to $200,000 if you have a joint account


Marie O Commented on July 8, 2005

Having a joint account with a spouse (or anyone) doubles the amount automatically to $200,000


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