Most people don’t recognize that operating a church is every bit as complicated as running any other organization and carries the same amount of weight. For example, all 501(c)(3) organizations must designate a Treasurer or CFO. Even when a team guides the financial direction, the person bearing that role knows the burden of protecting the church’s financial assets, which gets increasingly difficult each year.
It wasn’t that long ago (April 2023) that Silicon Valley Bank (SVB) became a news story for all the wrong reasons – bank failure. This failure again highlighted the fact that the FDIC (Federal Deposit Insurance Corporation) insured limit is $250,000. Per the FDIC website, “The standard insurance amount is $250,000 per depositor, per insured bank, for each account ownership category.” Churches with cash exceeding $250,000 in one bank could be at risk if the bank fails. For instance, a church with $150,000 in its operating checking, $75,000 in a money market, and another $75,000 saved in a separate fund for a capital project all at the same bank has an uninsured risk of $50,000.
On top of the FDIC limits, church CFOs are well aware of the painfully low money market interest rates. According to a January 2024 NerdWallet review, .063% is the national APY for money market accounts. Can you hear the collective ‘ouch’ from the church CFOs? Faced with these two factors, many churches are now actively considering alternatives such as an Insured Cash Sweep (ICS).
What Is An ICS
Banks that offer ICS accounts leverage a network of banks to provide FDIC coverage for your church’s deposits exceeding the $250,000 limit per bank. Each night, the church’s bank “sweeps” the funds exceeding the $250,000 limit into other FDIC-insured banks in $250,000 increments. The church maintains full access to its funds with the peace of knowing the cash is insured.
Limits The Risk
Churches with total cash exceeding the $250,000 FDIC limit in one bank can use the ICS account to allow their bank to sweep the money into other banks daily. The sweeps are coordinated with other FDIC-insured banks, ensuring the church’s cash remains insured. For the church’s CFO, this plan provides peace of mind that all of the money is insured – it’s like having SVB failure repellent.
Maximizes The Return
But an ICS account is more than just protection; it’s a way to make the money work for the church. ICS accounts pay a significantly higher interest rate than money market accounts. Where money market accounts average .063%, ICS accounts are closer to 5%. In the above example, the church had a combined total of $300,000 in one bank, leaving $50,000 uninsured. With an ICS account, the bank would “sweep” $50,000 at an APY of approximately 5%; the result would look similar to this:
Money Market: $75,000 @ .063% APY = $4 per month
ICS Account: $50,000 @ 5% APY = $208 per month
That’s a significant increase. In some cases, it’s like gaining a new family that regularly supports the church.
Church CFOs feeling the burden of stewarding (managing) God’s resources may want to consider setting up an ICS account with their bank. It provides FDIC insurance for all funds exceeding the $250,000 limit and has a far better return than most money market accounts.
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