A Maryland money-management firm has begun aggressively promoting a brokered certificate of deposit that, in an unusual twist, provides up to $300,000 in federal deposit insurance coverage.
The Calvert Group is pitching the product, dubbed the Calvert Insured Plus Account, as "an interest rate play for cautious savers."
Brokered CDs offering $100,000 in Federal Deposit Insurance Corp. coverage are commonplace. But one deposit expert, who did not want to be mentioned by name, said Calvert's offering appears to be unique.
Calvert is able to offer triple the usual level of FDIC insurance because it spreads the account's assets across three banks. Customers receive coverage from First National Bank of Chicago; FCC Bank, Wilmington, Del.; and Acacia Federal Savings Bank, Annandale, Va.
The money-market CD, with a yield pegged to the 90-day Treasury bill rate, has been around since 1983, but has not been marketed heavily in recent years, said David S. Rieben, director of national sales for Calvert.
In the last 90 days, sales have topped $20 million, boosting assets gathered this way to $197 million, he said.
Customers seem to find to the product convenient, he said. "A person has the option of going to three different banks or coming to us and opening one account."
Calvert actually lost money while promoting the CD during the 1980s and early 1990s, but the inevitability of higher rates made it an attractive product to keep in its cupboard, he said.
David Barr, a spokesman for the FDIC, said the product is well within insurance regulations, adding that. breaking up assets among several institutions was a good idea.
"It's nothing less than what we tell individuals to do," Mr. Barr said. "Why limit yourself to two or three? Why not open them up in a multitude of banks?"
Bob Heady, editor of Bank Rate Monitor, Boca Raton, Fla., said Calvert's CD has advantages for consumers who would normally have to go through a lengthy process of setting up several separate accounts for family members in order to receive as much deposit insurance as the Calvert CD is offering.
But with the market for insured deposits heating up, competition has a grown making attractive interest rates a powerful draw for investors who want a little more out of their cash deposits.
Calvert's CD yielded 4.29% at the end of July, while the average 30-day jumbo CDs during the same period only yielded 3.44%, according to Bank Rate Monitor. Money market accounts brought in a dismal 2.78%.
Another selling point, Mr. Rieben says, is that the assets are not tied up; instead, investors can access the account by writing checks or requesting a wire transfer by telephone.
The Insured Plus CD is marketed alongside Calvert Group's mutual funds and sold through investment brokers. Depositors receive a mutual fund statement from the company, and those with more than $100,000 in the CD will have indicated where the assets have been placed.
How the Insured-Plus Account Works
Calvert collects assets from customers who can invest at least $1,000.
The money is spread among three depository institutions, giving customers up to $100,000 in federal deposit insurance coverage from each.
Interest rates are tied to the 90-day Treasury bill and adjusted weekly.