Options for Protecting Your Bank Balances Over $100,000

The WSJ published an article today providing some information on how depositors can best protect the balances in their banks accounts should the bank fail. Some of the advice is well tread and we've covered it before. This includes opening joint accounts and revocable trust accounts.

The article did provide some info that we somewhat new to me.

"Another alternative for consumers is to use a bank that participates in the Certificate of Deposit Account Registry Service, or CDARS, which enables consumers to get up to $50 million in FDIC insurance, says Phil Battey, a spokesman for Promontory Interfinancial Network, which sells CDARS.

Currently, about 2,150 institutions, or about a quarter of all banks, offer the service. The way it works is that a customer with more than $100,000 opens a CD at a participating bank. That institution keeps $100,000, and the remaining money is distributed electronically in amounts of up to $100,000 to other CDARS banks."

Your money, with your permission, is shipped out to other banks. The service is free but banks generally charge 12.5 cents for every $100 for the coverage. You receive the same interest rate in these accounts as you would at your main bank. To you, the consumer, the process is invisible.