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CD's and FDIC Insurance
Old 03-31-2023, 02:25 PM   #1
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CD's and FDIC Insurance

How do you feel about laddering 5 $200K CD's at a institution such as Fidelity when the total account is only insured for $250K? Am I wrong?

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Old 03-31-2023, 02:38 PM   #2
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How do you feel about laddering 5 $200K CD's at a institution such as Fidelity when the total account is only insured for $250K? Am I wrong?



Coz
Yes, you are wrong. Up to $250k issued by any single bank is insured, so if you have 5 $200k CDs from 5 different banks the you would be fully insured.

You could have $10 million at Fidelity and it would be fully insured as long as any single bank didn't have more than $250k.
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Old 03-31-2023, 02:42 PM   #3
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So it matters not that they are in one account at Fidelity rather they were issued by 5 different banks? Thank you for your response. I held on the phone with Fidelity for longer than it took you to respond.
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Old 04-01-2023, 06:03 AM   #4
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Yup, I'm pretty sure that is what I wrote.
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Old 04-01-2023, 11:17 AM   #5
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The only time to be concerned about FDIC insurance is if the broker has its own bank (as Schwab does), and issues its own CDs. Then you would want to limit your investment in their CDs to the FDIC limit of $250k.
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Old 04-01-2023, 11:26 AM   #6
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The only time to be concerned about FDIC insurance is if the broker has its own bank (as Schwab does), and issues its own CDs. Then you would want to limit your investment in their CDs to the FDIC limit of $250k.
That is a very good point, IMO. And that is the main reason I haven't bought any Schwab CD's in my IRA brokerage or bank accounts there.
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Old 04-01-2023, 12:18 PM   #7
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The only time to be concerned about FDIC insurance is if the broker has its own bank (as Schwab does), and issues its own CDs. Then you would want to limit your investment in their CDs to the FDIC limit of $250k.
Why is that? Which other brokers have banks? (BofA/Merrill ?)
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Old 04-01-2023, 12:38 PM   #8
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The only time to be concerned about FDIC insurance is if the broker has its own bank (as Schwab does), and issues its own CDs. Then you would want to limit your investment in their CDs to the FDIC limit of $250k.
I don't get the difference. Don't you need to limit your investment in ANY bank's CDs to the $250k FDIC limits to be covered whether the bank is owned by the public, owned by a brokerage or owned by a bunch of bozos?
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Old 04-01-2023, 03:18 PM   #9
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That is a very good point, IMO. And that is the main reason I haven't bought any Schwab CD's in my IRA brokerage or bank accounts there.
I don't think it is a good point at all. Please elaborate as to why it is. I have Schwab Bank CDs in my brokerage accounts... but under the $250k FDIC limits.
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Old 04-01-2023, 03:34 PM   #10
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I don't think it is a good point at all. Please elaborate as to why it is. I have Schwab Bank CDs in my brokerage accounts... but under the $250k FDIC limits.

And if held in joint accounts, itís $250,000 per person listed on the account. I believe even beneficiaries get $250,000 each insurance coverage. Trust accounts add even more coverage with trustees and beneficiaries covered.
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Old 04-02-2023, 11:55 AM   #11
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I don't get the difference. Don't you need to limit your investment in ANY bank's CDs to the $250k FDIC limits to be covered whether the bank is owned by the public, owned by a brokerage or owned by a bunch of bozos?
Yes, you do. But one poster asked a question about whether the FDIC covered CDs bought through a broker. My response was just to caution that if their broker has their own bank and issues CDs, the FDIC limit still applies.

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Old 04-02-2023, 12:18 PM   #12
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I don't think it is a good point at all. Please elaborate as to why it is. I have Schwab Bank CDs in my brokerage accounts... but under the $250k FDIC limits.
I have several "accounts" at Schwab. "In one" of those accounts I typically keep 250k+ in cash (for quick investment opportunities, which could be just about anything), and lot's of CD's from other banks. I'm not concerned at all with the CD's/FDIC from the other banks that I have in that account. However, it's not clear to me how the FDIC would view a "250k CD from Schwab" sitting in that account along with the all the cash I keep there. I haven't given it a lot of thought since there are so many other CD options to buy. Probably not an issue but as I say, with so many other options I just opt for those. YMMV
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Old 04-02-2023, 12:55 PM   #13
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Fidelity states CD’s are covered by FDIC by the issuing bank. Secondly, Fidelity has extended SIPC coverage “customer limit of $1.9 million on coverage of cash awaiting investment.”
Link to this info https://www.fidelity.com/why-fidelit...-your-accounts
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Old 04-02-2023, 01:19 PM   #14
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Fidelity states CD’s are covered by FDIC by the issuing bank. Secondly, Fidelity has extended SIPC coverage “customer limit of $1.9 million on coverage of cash awaiting investment.”
Link to this info https://www.fidelity.com/why-fidelit...-your-accounts
Ditto for Schwab
https://www.schwab.com/legal/account...IC%20insurance.

"CDs you purchase through Schwab are aggregated with other deposits you hold at each issuing institution and are FDIC-insured up to $250,000 per bank. "
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Old 04-02-2023, 02:02 PM   #15
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Yes, you do. But one poster asked a question about whether the FDIC covered CDs bought through a broker. My response was just to caution that if their broker has their own bank and issues CDs, the FDIC limit still applies.



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