How Do ICS and CDARS Work?

In today’s economic landscape, savvy depositors always seek secure and convenient ways to manage their funds. Large depositors, in particular, face the challenge of finding safe avenues to deposit their substantial cash holdings while ensuring their investments remain fully insured. Two options that have gained popularity in recent years for addressing this concern are ICS and CDARS. In this blog post, we will delve into the mechanics of ICS and CDARS and how they offer a solution for large depositors. Learn how to save your money wisely.

What Is ICS?

ICS, or Insured Cash Sweep, is a financial service by IntraFi designed to help large depositors maximize the FDIC insurance coverage on their funds. The Federal Deposit Insurance Corporation (FDIC) typically insures deposits up to $250,000 per account owner at each FDIC insured bank. For individuals or businesses with substantial cash holdings exceeding this limit, ICS provides a way to maintain full FDIC insurance coverage while still having access to their funds when needed.

How Does ICS Work?

ICS functions by spreading your deposits across multiple FDIC-insured banks within a network. This network comprises numerous participating financial institutions, each capable of receiving a portion of your deposited funds. 

The process is straightforward:

• Select a Participating Institution: Large depositors start by opening an account with a participating financial institution, such as First National Bank of Oklahoma, as shown in IntraFi’s network banks.
• Deposit Your Funds: Once your account is established, you deposit your funds into it. Your deposited funds are divided into amounts below the FDIC insurance limit at the chosen institution.
• Distributed Deposits: The participating institution uses the ICS network to allocate funds across multiple banks within the network, ensuring that no single deposit exceeds the FDIC insurance limit.
• Full FDIC Insurance: All your funds remain eligible for FDIC insurance coverage, even though they are distributed among multiple institutions.

What Is CDARS?

CDARS, or Certificate of Deposit Account Registry Service, is another solution for large depositors who want to keep their deposits fully insured. CDARS focuses on certificates of deposit (CDs), which are time deposits with fixed terms. CDARS is another financial solution made by IntraFi.

How Does CDARS Work?

CDARS operates on a similar principle to ICS but with a focus on CDs:

• Select a Participating Institution: Like with ICS, you start by selecting a participating financial institution like First National Bank of Oklahoma that offers CDARS services.
• Choose the CD Term: Decide on the term for your CD, which typically ranges from a few months to several years.
• Deposit Funds: Deposit your desired amount into a CDARS account at the participating institution. Your funds are then divided into CD-sized amounts within the FDIC insurance limit.
• Distributed CDs: The participating institution utilizes the CDARS network to allocate funds into CDs at various banks within the network, ensuring each CD remains within the FDIC insurance limit.
• Interest and Maturity: Your CDs earn interest and mature according to their terms, just like traditional CDs.
• FDIC Insurance: All CDs are eligible for FDIC insurance, and the entire process is seamless on your side.

Comparison of ICS and CDARS

ICS and CDARS offer a means for large depositors to maintain sizable balances while keeping their investments fully insured without the complexity of managing multiple accounts at various banks. But what is the difference between CDARS and ICS?

• Focus: ICS caters to a broader range of deposit types, including checking and savings accounts, while CDARS is tailored explicitly for CDs.
• Liquidity: ICS provides more flexibility in quickly accessing your funds, as the funds are typically held in demand deposit accounts. CDARS, on the other hand, involves CDs with fixed terms, which may limit liquidity.
• Interest Rates: Interest rates may vary between ICS and CDARS accounts, so it’s essential to compare rates when choosing between the two.

Make More Money With Your Money Securely

Now that you know the difference between ICS and CDARS, the choice between these options will depend on your financial goals and preferences. First National Bank of Oklahoma has a long history of offering ICS and CDARS services, and other innovative products, to their clients.

If you’re interested in exploring these options or want to learn more about them, First National Bank of Oklahoma can set up a customized solution for your business. We are here to help you maximize your financial resources and achieve your goals. Contact us today and learn how you can make more money with your money.