http://www2.fdic.gov/edie/

You are paying for the convenience of CDARS consolidating your CDs at one bank. It isn’t optimal, as I wrote before, because you can do the same thing and get higher rates if you did it yourself. There are quite a few fees CDARS imposes on the banks, so although participating banks list “cd-level” rates they will be less on the whole. fees include “onboarding fees”, transaction fee, and account maintenance fees the banks have to pay.

the major banks do not participate in CDARS, because they have high deposits already. CDARS focuses on local and regional banks. Smaller deposit banks can increase their net deposits and expand their deposit base by participating in CDARS, thus increase loan capacity.

there is the risk CDARS, because it includes smaller banks. These banks can go under. Since you are going through a primary bank to get other CDs you might not be inclined to check the financial stability of the other bank. after all the CD is FDIC insured; however, the end game is that you want to make money, not break even on your principle. the other risk is how banks within the network balance the books. it is different and there is more supervision than what caused the S&L crisis, but there is still risk that some may want to do engage in misuse of the deposits.

You can also do the same thing if you are invested in a large multibank holding company. That company can divide up your investment assets into their subsidiary banks in order to diversify your assets under several deposits to meet the $100k FDIC cap.

Also jumbo-cd’s, although not FDIC insured for more than $100k, have less risk to loss, since jumbo-cd holders have higher priority and preference if a bank becomes insolvent.

This service works by breaking up your >$100,000 deposit into many different $100,000 deposits, thereby compounding the effects of conventional FDIC insurance for you.

I have no idea about any further details as I am not personally in a position to use such a service (yet).

-Phil

if you are doing it only for 4 months, i wouldn’t be worrying about FDIC insurance. If BAC goes under in 4 months, we are all seriously in deep doodoo.

with that said, 5.1%APY isn’t much. you might be better off getting the tax benefit from doing t-bills, WAMU 5.5%APY 6 mo CD (must purchase online $1k-$250k), Chase 5.35%APY-5.45%APY 7mo CD ($10k min 5.35 or 5.45 depends on region) a higher yield savings account like igobanking at 5.3%APY, ING electric orange checking at 5.3%APY for $100k+

with that much deposits, you should also be looking into premier or private banking, which also provides higher rates.

Bank of America has premier bank for min deposit of $100k and private banking.

citi gold account $100k deposits

HSBC premier starts at $100k deposits

chase platinum banking at $75k deposits