What Is the Certificate of Deposit Account Registry Service?

The Certificate of Deposit Account Registry Service (CDARS) is a program that allows the public to spread money around various banks. The purpose of CDARS is to help people who invest in certificate of deposits (CDs) to stay below the Federal Deposit Insurance Corporation (FDIC) insurance limits at any given bank.

CDARS also provides a way for consumers to access multi-million-dollar FDIC insurance on CD investment principal and interest and to have someone else manage the risk of bank failures for them.

Key Takeaways

  • The Certificate of Deposit Account Registry Service (CDARS) helps consumers stay under the FDIC insurance limit of $250,000 per depositor per bank to keep their money insured. 
  • CDARS operates by opening accounts with various banks across their large network.
  • Customers who use CDARS only deal with one local bank, rather than many banks across the network. 

Understanding the Certificate of Deposit Account Registry Service (CDARS)

The Certificate of Deposit Account Registry Service (CDARS) is a for-profit service run by the Promontory Interfinancial Network, which was founded by former financial regulators in 2003. CDARS enables consumers to invest their money in CDs ranging in maturity from one month to five years and provides access to CD-level rates, which are often better than Treasuries and money market mutual funds.

Users negotiate one interest rate per maturity on CD investments placed through CDARS, so there is no need to tally disbursements manually for each CD or negotiate multiple rates per maturity. Each local bank sets its own interest rate that is paid on the entire deposit amount.

Funds invested through CDARS are deposited only in FDIC-insured banks and the local bank acts as a custodian for CDARS deposits. The sub-custodian for CDARS deposits is the Bank of New York Mellon, which is the largest custodian in the world.

People usually deposit their money in different banks to avoid exceeding a bank’s FDIC insurance limit of $250,000 per depositor. CDARS comprises a network of more than 3,000 American banks and savings institutions and eliminates the need for people to go from bank to bank to deposit money. Consumers can also accomplish this without CDARS by opening individual accounts or using brokered CDs, but those approaches require significantly more time and complexity.

How to Use the Certificate of Deposit Account Registry Service (CDARS)

CDARS is used by individuals, businesses, nonprofits, credit unions, financial advisors, and for public funds. Using CDARS is as simple as finding a local participating bank and depositing money, with a separate Deposit Placement Agreement specific to CDARS. That local bank then spreads the money across several member banks, ensuring that the amount of money in each bank never surpasses the FDIC limit of $250,000 per depositor per bank.

As part of the CDARS program, the consumer conducts business with only the local bank and receives a single consolidated statement that contains information for each account, rather than keeping multiple accounts at multiple banks, with multiple logins and quarterly statements. Since banks pay to participate in CDARS, consumers pay any applicable fees directly to their primary bank.