FDIC Coverage Strategies for Large Cash Reserves

Thirteen banks have failed in the last five years, and the Federal Deposit Insurance Corporation [FDIC] protected depositors at all those institutions. These bank failures have shown the unparalleled value of FDIC insurance, but coverage is limited to amounts below the $250,000 insurance threshold at each bank*.

Business cash reserves often vastly exceed the standard FDIC limit, so how can companies ensure that their entire balance is protected from bank failure? Fortunately, there are several methods for attaining access to extended government insurance coverage, and each has its own blend of benefits and drawbacks.

*While this article’s primary focus is FDIC coverage strategies, please note that National Credit Union Association [NCUA] coverage and limits at credit unions are functionally equivalent to the protection afforded by the FDIC for banks. The same strategies listed below can be used at credit unions or at a combination of banks and credit unions.

Strategy 1: Multiple Bank Accounts

The FDIC insurance limit applies to money held at each insured bank, so cash managers can secure additional protection by investing with multiple banks. For example, a business with $1 million in cash reserves could open accounts at four or more different FDIC insured banks to secure full protection.

Benefits of Multiple Bank Accounts

A portfolio of bank accounts provides two key advantages. First, it can provide access to full government protection for a large sum of cash. Second, cash managers can shop for competitive interest rates among their accounts and choose the banks that will provide them with the greatest returns.

Drawbacks of Multiple Bank Accounts

The main drawback is the significant amount of time and effort needed to implement this strategy. Further, cash managers would need to compare the interest rates from all banks across the country to identify the most competitive rate. There are currently 4,462 of these FDIC insured banks in the U.S., so comparing all of them would require significant time from a sizeable team.

Once the cash manager located the banks with the highest rates, they would need to manually open accounts and fund them. This also requires an upfront investment of time.

Then, the cash management team would need to continuously monitor all banks for changes in their interest rates to ensure their returns remain competitive. This team would also need to reconcile multiple statements each month and move cash between accounts to ensure it is accessible when needed. These drawbacks make the multi-bank strategy an untenable solution for most organizations.

Strategy 2: Access Extended Deposit Protection Through a Single Bank

For companies with substantial cash reserves, multiple accounts are a hassle. Instead, they can invest with a bank that offers extended deposit insurance. Services like AMMA™ Exchange allow financial institutions to access full FDIC – or credit union equivalent, NCUA – coverage for their customers’ cash without the need for multiple bank accounts.

Benefits of Extended Deposit Protection Through a Single Bank

Simplicity is the main draw of accessing extended government insurance through a single financial institution. Cash managers can achieve full protection for their funds while maintaining a single relationship with their chosen bank or credit union.

Drawbacks of Extended Deposit Protection Through a Single Bank

Deposit rates can vary dramatically between banks and geographic areas, so returns are an important consideration when choosing where to invest. This strategy means cash managers maintain the burden of choosing a bank or credit union that will offer consistently competitive returns for their company’s reserves.

Strategy 3: Partner Directly With American Deposit Management

For business cash managers that want to minimize effort, access full deposit protection, and earn competitive returns, our deposit management solutions are an attractive option. These solutions are built on modern fintech that spreads cash across multiple insured financial institutions to achieve full government protection – all with a single, easy-to-manage account.

Benefits of Our Deposit Management Services

Unlike manually managing multiple accounts, our modern deposit management solutions provide access to full insurance from the FDIC or NCUA with a single account and consolidated monthly statement. Patent-pending technology also allows us to offer access to competitive rates from our vast network of banks and credit unions – with daily rebalancing to help companies optimize their returns.

These benefits make our deposit management services the most robust solution available to effectively manage large cash reserves.

Gain Access to Full FDIC or NCUA Insurance With ADM

At American Deposit Management, we make it simple for companies to secure access to government protection for all their cash. Our modern deposit management solutions are tailored to organizations with cash reserves that vastly exceed the FDIC or NCUA limit.

In addition to access to the ultimate safety for cash through our patent-pending technology, we offer nationally competitive interest rates from the hundreds of financial institutions in our network. Best of all, we accomplish all of this with one account and a single, consolidated monthly statement. To learn more about how we protect business cash and get started, contact a member of our team today.