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Clark Howard's Tips

April 16, 2008

Wachovia, Washington Mutual and National City -- 3 of the nation's top banks -- have all had to go looking for more cash, but hundreds of smaller banks around the country won't be able to find an angel to avoid failing.

If you have less than $100K in a failing bank, none of what Clark is about to say matters to you; you'll be protected up to the full FDIC limit of $100K. But many business owners, people with inheritances and local governments have deposits that exceed that limit.

What can they do to avoid getting burned in the event of a bank collapse? CDARS.com extends FDIC protection up to $50 million by spreading your money among a number of participating banks. That way you never have more than $100K at any one financial institution.

On a related note, many people are upset that savings rates are in the toilet. But there are deals to be found if you search around. Many of the deals come from unusual sources. For example, Capital One is looking for a quick cash infusion on the cheap. So they're offering a simple savings account that pays 3.75% APY (accurate as of 04/16/08) if you have a minimum of $10K. Clark likes to check BankRate.com for CD rates. A quick search reveals that Countrywide is offering a CD that pays 4.05% APY and GMAC offers one that pays 3.90% APY (both accurate as of 04/16/08).

Do you have reservations about the financial health of Countrywide or Capital One? You'll be fine as long as you stay below the FDIC limit.

Consumer advice courtesy of