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Web site offers CD rates on demand

Editor's Note: On Jan. 31, 2001, MaxRate.com temporarily halted trading activity on its site.

CD rates getting fasterJust 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.

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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.

Related information:
Check out the rates!
More savings news
Savings information
Definitions:Savings terms

-- Posted: July 18, 2000

 

 



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