New Bank Auction Site Launches

MoneyAisle is a new bank auction site which launched today. MoneyAisle allows consumers to place a deposit (either a savings account or a certificate of deposit) up for auction where the network of 70 MoneyAisle banks bid up the rate until one bank emerges as the winner. At that point the consumers can register with MoneyAisle and lock-in the rate. The bank deposit is then set up at the winning bank. The process is free for the consumers and takes ten minutes or less.

Other online bank auction sites have come and gone over the lat few years, but MoneyAisle has probably the nicest looking and simplest-to-use interface of the bunch. The problem with the bank auction sites has always been that the consumers typically gets a “winning bid” or rate that is higher than their local bank might offer, but not as high as what they can find from rate aggregator like Money-Rates.com or Bankrate.com.

For instance recent winning bids from the Zions Direct Auctions include:

May 28, 2008: 3-month CD 3.24% APY

May 29, 2008: 6-month CD 3.20% APY

May 30, 2008: 1-year CD 3.68% APY

All three winning bids are well below the top rates listed at Money-Rates.com or Bankrate.com. Even a test drive at MoneyAisle today revealed two winning bids (on an online savings account and a 6-month CD) below the top rates listed at the other two sites. This is not a surprise when considering that the Zions Direct auction and the MoneyAisle auctions are limited to banks to banks participating in their programs, while bank rate aggregator sites will include rates from all 8,000 banks in the country if the rate qualifies. What makes the process even more frustrating for an investor who has multiple bank deposits is that a winning bid may be from a bank where the depositor already has funds and may be at risk of exceeding the FDIC insurance limit. It may not be as exciting, but it is simpler and more straightforward to see a text list of banks paying the top rates rather than hope for the best with an auction. So while the auction process is probably cheap and efficient for banks and a fun endeavor to participate in for consumers - for savings investors looking to squeeze the most interest out of their bank savings account - online auctions are not the best answer.