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Editor's Note:
On Jan. 31, 2001, MaxRate.com temporarily
halted trading activity on its site.
 Just
as interest rates on certificates of deposits are hitting
new highs, the Internet has created a faster way to grab them.
People who want to snap up the best rates
on certificates can grab them almost instantly from MaxRate.com,
an Atlanta company that jumped into the online CD auction
business in April.
Online CD auctions have been around for
about a year. What makes MaxRate different is that it offers
certificates of deposit from many institutions -- at lightning-fast
speed.
The process is simple -- finding out which
banks are willing to meet or beat your rate is free and fast.
Click on the "quick bid" graphic on the MaxRate.com
home page, then enter the amount of money you want to spend
on the CD, the investment period and the rate you want. Within
seconds you know if any banks are willing to play ball. If
you accept the bid, the site shows how to complete the transaction.
How it works
I tried MaxRate.com using data from Bankrate.com
as a guide. On the day I checked, the national average for
a one-year CD was 6.36 percent. But on that day, Bankrate.com
data listed two banks that were offering 7.50 percent on $500
and $2,000 CDs. I submitted three one-year bids to MaxRate.com
-- $1,000 at 7.75 percent, $2,000 at 7.75 percent and $2,000
at 7.50 percent. No one bit. But when I stuck with the national
average it was a different scenario.
A bid of $2,000 at 6.36 percent got an
offer from Provident
Bank in Cincinnati for a 7.09 APY. A bid of $10,000 at
6.36 percent received an offer from Florida
Bank, N.A., in Tampa for a 7.15 APY. But by checking
the Bankrate.com list of best CD rates that day, I found Heritage
Bank in Decatur, Ala., would have given me 7.35 percent for
my $10,000.
The problem with MaxRate.com may be the
low number of banks registered with the site. Chief strategist
Scott Cotton says 17 banks are on board now, with another
17 slated within the next three weeks. As that number continues
to grow, customers will get a better opportunity to find the
highest rate available for their money.
The national average for a one-year CD
is 6.36 percent. Rates haven't been that high since mid-1995,
according to data from Bankrate.com's weekly surveys.
Negotiating
for the best deal
Stephen Brobeck, executive director of the Consumer
Federation of America, says MaxRate.com illustrates the
trend toward negotiable prices for financial services.
"But consumers should be wary of
the limited number of institutions participating at this early
stage," he says. "This system only works well if
there is a large number of institutions. Consumers should
be sure not to bid lower."
MaxRate.com's Scott Cotton says people
are finding the site and that the number of visits is exceeding
expectations.
"Customers participate for free,
there's a minimal expenditure of time and, potentially, they
get the highest rate possible."
For those who flinch at giving out personal
information, there's a page on MaxRate.com that may annoy
you. It says "you can significantly improve your chances
of receiving an even higher APY by providing additional anonymous
information ..."
Cotton explains that providing that information
lets MaxRate.com's participating banks home in on certain
consumers.
"We ask for basic demographics on
the investor so the bank can target the customer they want
and they may be willing to give them a better rate."
Auction
advantages
MaxRate.com is different from other CD rate auction
sites in that most of the others are banks that are pushing
their own CDs, while MaxRate.com is a CD broker that acts
as an intermediary between banks and people who want CDs.
Another difference is that CD auction
customers may need to wait 24 hours to learn whether their
bid has been accepted.
"MaxRate.com does a good job,"
says Ken Tepper, President and CEO of USABancShares.com
in Philadelphia. "We could give CD results instantly
but we like to create a process where people come back to
the site repeatedly to see how they're doing. In our auction
you see instantly what the competitors are doing because the
yield is right there. Anyone in the country can pick a higher
or lower yield, so it's extremely real time."
Although Tepper says his bank's goal isn't
to generate a million CD sales this month, there are plans
to expand -- including adding a wireless component so customers
can bid using devices such as Palm Pilots.
MaxRate.com won't be letting any grass
grow under its feet, either. Cotton says there are plans to
let banks try to sell you things such as credit cards while
they're trying to close the CD transaction. The benefit to
the customer is the bank may be willing to up the CD rate
if the customer accepts the card.
-- Posted: July 18, 2000
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