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Let Banks Bid for Your Savings


Online Auction Looks for the Best Rates



 Bonnie  Biafore Interest rates are as low as they’ve been in ages on short-term savings options such as savings accounts, money market accounts and certificates of deposit. And with the stock market looking like the world’s largest roller coaster these days, lots of folks are especially interested in finding relatively safe places to stash some cash and still earn a reasonable return.

MoneyAisle offers a new twist on the quest for the best rates: With banks bidding against each other to win your business, this site turns the eBay auction model upside down. Instead of would-be buyers making cash bids to purchase what someone has to sell, banks bid interest rates on high-yield savings accounts and CDs to win a customer.
   
Savers and banks both win. Banks, especially smaller local institutions, can get their best rates in front of potential customers they might not reach otherwise. (Banks must have at least a one-star rating from Veribanc and be insured by the Federal Deposit Insurance Corporation. Those that suffered a significant net loss in the most recent reporting period are excluded.)
   
MoneyAisle charges banks to participate and secures an additional fee from them when a customer accepts a bid and opens a new account.
   
Auctions for high-yield savings accounts are available in all 50 states. CD auctions, though, are limited to states that don’t consider them securities; that eliminates Georgia, Hawaii, Idaho, Maine, Mississippi, North Carolina, Ohio, Ver-mont, West Virginia, Wyoming and the District of Columbia. (MoneyAisle is working to address this limitation.)

Get Ready for the Highest Bidder

You must register with the free service to see the winning bank’s name and lock in an interest rate. If you accept a bid and the bank contacts you about opening the account, you then provide it with a Social Security number, date of birth and address, among other information.
   
To start, go to the MoneyAisle homepage and click Register. Fill in your user name, password and e-mail address. Choose a security question and type the answer.

MoneyAisle, by the way, follows standard security procedures, such as encrypting information just as banks and brokerages do. The auction service’s data center uses several types of security to protect profile information.

Here’s how an auction works:

•  On the home page, click Sign In. Type your user name and password, then click Sign In again.
•  Click Bank CDs or High-Yield Savings.
•  On the next screen, fill in the boxes to tell the bidding banks about your deposit. If you clicked High-Yield Savings, the next screen asks for initial deposit amount, state of residence and ZIP code (this is optional). For Bank CDs, you specify the deposit amount, CD duration, state of residence and ZIP code. Deposits can range from as little as $100 to up to $500,000. CD durations span three to 60 months.
•  If you want to exclude certain banks because, say, you have already deposited the maximum amount insured by FDIC there, click the Advanced-Exclude Banks link to the right of the Start Auction! button. Then click Add/Remove Excluded Banks. Type the bank’s name in the first box and click Search. Banks with similar names appear in the Search Results list. To exclude a bank, click its name, then click Exclude.

Open the Virtual Auction   

To begin the bidding, click Start Auction! MoneyAisle picks the highest rate, then starts another round at that rate to see whether any banks are willing to increase the bid. The auction runs rounds until only one bank submits a bid. In a tie, MoneyAisle chooses the winner randomly.
   
The webpage updates the number of rounds, number of bids and highest current bid as the auction progresses. After a few minutes the auction ends, and you learn the final bid and winning bank. One test auction I conducted required 12 rounds to obtain a winner offering an annual percentage yield of 4.4 percent for a $100,000, 18-month CD.
   
If you don’t want to open an account with the winning bank, you’re done. If, however, you like the rate and the bank, you have 30 minutes to provide additional contact information and accept the bid.
   
Once contacted by the bank, you’ll need to open the account within a set number of days to secure the quoted rate. You can open the account online (if the bank offers that option) or offline.
   
MoneyAisle limits the number of auctions you can run each day to 10, though the company is considering removing this restriction.

Link of the Month

Bankrate is probably still the best-known source for all kinds of financial rates, including those for savings accounts, CDs and mortgages. One advantage to searching its site is that you can choose the bank you want based on interest rate, star rating and other parameters. For example, you might be inclined to pass up a better rate because you want a financial institution with the highest safety rating.
   
Searching Bankrate’s database for a CD with the same parameters as the MoneyAisle test auction turned up three banks with similar interest rates. One Veribanc-rated five-star bank offered 4.41percent; a two-star bank offered 4.45 percent.
   
To search for CD rates, go to the homepage and click CDs & Investments (for savings accounts, click Checking & Savings). Locate the Select a CD or an IRA Product drop-down list, choose High-Yielding CDs or CDs by State, then click Go. Select a search option, then click Next.
   
If you picked Search by 100 Highest Yield, you now need to choose the duration, then click Next. (If you picked Search by State, choose the state and click Next, then the city nearest you, and Next, then the duration, and Next.) You’ll receive a list you can sort by institution, rate, annual percentage yield or minimum deposit.


Websites of Interest

MoneyAisle   
www.moneyaisle.com

Bankrate 
www.bankrate.com


Bonnie Biafore is the author of 24 books about investing, personal finance, project management, software (such as QuickBooks and Project) and the recently published novel, Fresh Squeezed. Go to BonnieBiafore.com to learn more.



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