How to Safely Exceed FDIC Limits

With the banking world back into doom-and-gloom mode, safety is the name of the game for investors and savers.

Many of those looking to keep large amounts of cash safe have fled to 10-year Treasury bonds, which were yielding about 2.18% on Jan. 15. Of course, those investors face some capital risk if they sell the bonds.

To play it even more safely, investors may consider three-month T-bills, but they were only yielding 0.10%. Six-month bills yielded 0.72%.

Meanwhile, on BankingMyWay, you can easily find a six-month CD yielding 3.00% or higher. But what about FDIC insurance?

The Federal Deposit Insurance Corp. has temporarily increased its basic deposit insurance limit for individuals to $250,000, but that is set to expire at the end of 2009. That will be here before you know it. What if you have deposits that exceed those limits?

You could spread your deposits across accounts at different institutions, but that would be an arduous record-keeping chore. And, of course, it would be a hassle to visit several banks or S&Ls. But the Certificate of Deposit Account Registry Service, or "CDARS," can do this for you.

The service, provided by Promontory Interfinancial Network, has been available for six years. About 2,800 banks and thrifts in all 50 states offer the service, which allows CD depositors with balances of up to $50 million to have their entire balances insured by the FDIC. The number of participating institutions has increased 53% over the past year, not surprising when you consider that 25 banks failed last year.