6 ideas for insuring your deposits |
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"Since mid-July, we've been doing about twice the business each week as we did in a typical week in January, and
about three times the transaction volume we were doing a year ago. Our business in California has skyrocketed. It took us about
five-and-a half-years to garner approximately 150 bank charters in California as members of our network. In the 11 days after IndyMac
failed, we had requests from 40 different banks."
For a detailed explanation of the CDARS program check out Bankrate's story, "CDARS:
Beat the $100,000 FDIC limit."
3. IDC Deposits
Just as the CDARS program divvies your excess funds among CDs at different banks, IDC Deposits does the same with money market
accounts. Its network consists of over 250 banks, allowing individuals to have FDIC coverage for up to $5 million in what's called
an MMAX account.
Another way MMAX is similar to CDARS is that the interest
rate you earn may not be as good as you would get shopping around
and placing your funds in various institutions yourself. But there's
a huge convenience factor to consider. With both programs you receive
one statement and one Form 1099 for tax records.
For example, IDC currently pays banks 2 percent on deposits. The bank you do business with may give you an interest
rate of 1.75 percent. That's apparently not stopping people from going with the program.
"We are absolutely seeing an increase in business," says IDC Deposits President Kim Weeks. "I'll be the first to
tell you that six months ago, four months ago, it was a tougher sell on the investor side because these are not great rates, and
we understand this. But because of everything going on right now, there's a trade-off in the convenience and the assurance that
the money is insured."
4. Wintrust Financial
Wintrust Financial is an example of a small group of banks that
provide excess coverage. Wintrust is a bank holding company that
has 15 separately chartered banks in the Chicago and Milwaukee areas.
Wintrust makes its MaxSafe account available to customers of the
15 banks. It allows individuals to insure $1.5 million in CD and
money market accounts -- more than $16 million if you're able to
title accounts differently.
People from outside the Chicago and Milwaukee can apply for an account at one of the banks, but Wintrust is being
cautious for varying reasons, says CEO Edward Wehmer.
"We did a one-week test in Tennessee and Kansas City and it was surprising the number of calls we had. Eventually,
there will be online (applications), but we want to be very careful regarding the 'know your customer' rules on the online side of
the business, especially with a money market account. Also, we don't have funding needs. This has been a defensive product for us.
I'm afraid that if I offer it, I could get $1 billion in deposits and nowhere to go with it."
5. Brokerage accounts
If you have an account with institutions such as Fidelity or Schwab, you can buy CDs at different banks from across the country with
the click of a mouse. In addition to the convenience of one-stop shopping, you'll often find yields above the national averages. Be
aware that you're responsible for making sure your money is divided among nonrelated banks. For more information on brokered deposits,
read "Brokered CDs: What happens if the bank fails?"
6. FDIC
The FDIC allows you to insure significantly more than $100,000 if you're able to title accounts separately. For instance, you could
have $100,000 covered in an individual account, $100,000 covered in a joint account and $250,000 in a retirement account. For more
information on titling see "FDIC insurance now $250,000 on retirement accounts."
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