CDARS, the Certificate of Deposit Account Registry Service, is a program that lets you place a large sum into CDs and keep the whole balance covered by FDIC insurance, even when the total runs into the millions. You sign one agreement with a single “relationship bank,” and behind the scenes the IntraFi network breaks your deposit into pieces smaller than $250,000 and places each piece at a different member bank. You get one statement, one tax form, and one point of contact. About 64% of U.S. banks participate in the network.1IntraFi. IntraFi Home
How the FDIC Coverage Actually Works
Standard FDIC insurance covers $250,000 per depositor, per insured bank, per ownership category.2eCFR. 12 CFR 330.1 – Definitions Put $2 million into one bank and $1.75 million of it sits unprotected. CDARS solves that by splitting the deposit into slices that each stay under the limit and parking each slice at a separate bank in the IntraFi network. A $2 million placement might land at eight or nine institutions, and each piece carries its own full FDIC coverage.
The legal mechanism is pass-through insurance. Federal regulations let the FDIC look through the account title at each receiving bank and treat you as the beneficial owner of the funds.3eCFR. 12 CFR 330.5 – Recognition of Deposit Ownership and Fiduciary Relationships Your ownership is recognized at every bank in the chain, even though you never opened those accounts yourself.1IntraFi. IntraFi Home
The Relationship Bank and IntraFi’s Role
You deal with one bank. It accepts your deposit, signs you up, coordinates placement across the network, and consolidates your reporting. You never need to know the names of the other institutions holding your CDs, though they appear on your monthly statement.
IntraFi runs the matching technology and coordinates member banks. Deposits flow between banks reciprocally: your relationship bank sends money out to the network and receives roughly equivalent deposits back from other members’ customers. That swap keeps everyone’s liquidity stable while ensuring no single bank holds more than $250,000 of your money. IntraFi itself is not a bank and is not FDIC-insured. The protection comes from the individual insured banks where your CDs are finally placed.1IntraFi. IntraFi Home
Reach matters here. About 64% of U.S. banks are in the network, along with 91% of the 100 largest banks, which is what makes aggregate coverage in the hundreds of millions achievable through one relationship.1IntraFi. IntraFi Home
Setting Up an Account
You sign a Deposit Placement Agreement with your relationship bank. This contract governs how the bank distributes your funds and how information moves through the network.4Lancaster County, Nebraska. IntraFi Network Deposits DDA-MMDA Deposit Placement Agreement You provide your federal taxpayer identification number, either a Social Security number or an EIN for a business or nonprofit. The bank handles identity verification and any required compliance screening.
You also choose your CD terms at signup. CDARS maturities range from four weeks to three years.5IntraFi. ICS and CDARS Rates are negotiated with the relationship bank and depend on term length, deposit size, and market conditions. Rates may run modestly below what a determined shopper could find at individual banks. What you’re paying for is the coverage and the consolidation. Setup can usually be completed in one meeting, in person or online.
Statements and Tax Reporting
You receive one consolidated statement each month listing every bank holding a slice of your deposit, along with each CD’s maturity date and the interest earned. At year-end, the relationship bank sends a single 1099 summary covering all taxable interest income across the network. There’s no chasing separate tax documents from a dozen banks.
When a CD matures, your relationship bank coordinates the return of funds and, based on your standing instructions, either rolls the money into new CDs or makes it available for withdrawal.
CDARS vs. ICS
CDARS is only for time deposits. If you need FDIC-insured placement for cash you access regularly, that’s a separate IntraFi product called ICS, the Insured Cash Sweep, which places funds into demand deposit and money market deposit accounts at network banks.5IntraFi. ICS and CDARS CDARS locks money up in exchange for a fixed rate; ICS gives you daily liquidity at a variable rate. Many depositors run both: CDARS for money they can commit for months or years, ICS for operating cash and reserves.
Early Withdrawal Penalties
CDARS CDs are time deposits, so pulling money out before maturity triggers a penalty, and you cannot make a partial withdrawal. The entire CD must be redeemed. Penalties depend on the term and can eat into principal on short-dated CDs:
- On a 4-week or 13-week CD, the penalty is roughly all the interest that would have been earned over the full term (28 or 90 days).
- On CDs of 26 weeks or longer, the penalty is roughly half the interest that would have been earned over the full term. On a one-year CD, that’s about six months of interest.
One exception: no penalty applies if the sole owner, a joint owner, or the sole beneficiary of a trust account dies. Early withdrawal proceeds typically become available within two business days after the network bank returns the funds, though your relationship bank is not required to advance the money before then. There is no secondary market for CDARS CDs; you cannot sell them to another party.
What Happens If a Bank Fails
Two scenarios matter, and they play out differently.
If one of the network banks holding a slice of your money fails, that slice is FDIC-insured up to the standard limit. Because CDARS keeps each placement below $250,000, deposits at the failed bank fall squarely inside the insured range. In past network failures, the FDIC has either transferred the CDs to a healthy institution or paid out insured principal and accrued interest to depositors, usually within days.
If the relationship bank itself fails, things get more involved. Your CDs at other network banks remain insured and legally yours, but the institution that managed your account is gone. In most cases the FDIC arranges for another bank to assume the failed bank’s operations, and the CDARS account transfers with it. IntraFi cautions that during brief settlement windows, such as right after a large deposit but before it’s distributed to the network, or after a maturity payout arrives but before it’s reinvested, your balance at the relationship bank itself may temporarily exceed $250,000.1IntraFi. IntraFi Home During those windows, the excess is uninsured. The exposure is short but real.
Trade-Offs Before You Commit
CDARS is a convenience product. The rate you earn will probably be a bit below what an aggressive CD shopper could piece together by opening accounts at multiple banks directly. What you get in return is one relationship, one statement, and one 1099. For depositors handling millions, that trade usually pencils out. For someone with $300,000 who only needs two banks to stay fully insured, doing it manually may be worth the small extra effort.
There are generally no separate fees charged to depositors. The cost is built into the rate spread between what network banks pay and what you receive, and that’s how the relationship bank earns its share.
If you might need to touch the money before maturity, think hard about the penalty structure before choosing CDARS over ICS. The insurance benefit is the same either way; the liquidity is not.