With the fall of Silicon Valley Bank on March 10, we’re looking to provide proactive advice as to how you can avoid such a situation in the future. Today, we’re diving into Insured Cash Sweep, an option that helps maximize the amount of your cash that’s covered by FDIC insurance.
What is Insured Cash Sweep (ICS)?
Insured cash sweep is a safe and convenient service that provides FDIC insurance on large balances while giving you access to your money, as well as the ability to earn interest. The provider of the Insured Cash Sweep is IntraFi Network, which is based in Arlington Virginia.
Through ICS, you can earn interest on funds placed into demand deposit accounts, money market deposit accounts, or both, and rest assured knowing that your ICS funds are eligible for multi-million dollar FDIC insurance.
You can also enjoy unlimited program withdrawals or up to six program withdrawals per month, depending on the account type you choose.
How Does ICS Work?
Let’s say you have $10 million to deposit. You don’t want to risk losing money in the stock market, but you also want to earn interest. With ICS, you can deposit the entire sum with your primary bank. That bank will divide your deposit into amounts up to $250,000 (the standard FDIC maximum) and transfer these smaller deposits to ICS Network banks (all FDIC-insured). As a result, you can access FDIC insured coverage from many institutions and maximize your insured cash.
Why Does ICS Work?
The FDIC will insure up to $250,000 of an individual’s deposit accounts at any FDIC-insured financial institution. There is no limit on the amount of money you can receive FDIC protection on; the limit is per bank, not per person. So, you could manually open deposit accounts at different banks in order to obtain FDIC insurance on a total larger sum. The benefit of enrolling in ICS is that your primary bank will do that for you, saving you time and hassle. Instead of receiving multiple monthly statements, you’ll just get one, and you can check your balance online through your primary institution at any time. All the while, you get to work with the same bankers you already have a relationship with.
Which Bank Acts as Custodian of my Funds?
Your primary bank is the custodian for your ICS deposits. Then there will be sub-custodians at other banks in the ICS Network where your funds are deposited.
Has Anyone Ever Lost Money Through ICS?
The Insured Cash Sweep service has been tested with billions of dollars and designed to comply with FDIC regulations. No ICS depositor has ever lost money in the system. In every instance where an ICS Network member bank has failed, all claims for deposit insurance were paid by the FDIC.
If you’re concerned about financial contagion after the collapse of SVB, we’ll give you the advice that most financial professionals offer: diversify! ICS is a safe way to diversify your cash so as not to be exposed to turmoil at any one bank.