Personal Finance Blog By MoneyRates - June 2008

A growing number of financial experts and pundits have been on the airwaves advising people to keep their cash savings liquid in money funds, money markets, bond funds, savings, and checking accounts due to the forecast for higher interest rates in the future. The line of thought is that within the next year inflation concerns may create an increase in yields on mid-term and long-term US Treasuries and thus the time deposits influenced by those Treasury yields. However, today the yield curve bounces up in the 1-year, 18-month, and 2-years time period which might justify locking in +4.00% yields. If we look at a 2-year time horizon, and a saver who stays in cash for the first year - then the rates on a 1-year CD would have to increase to 6% if the investor was earning 2% in a money fund or money market or increase to 5% if the investor could find 3% - all just to match the 4% readily available on two-year CDs for that two-year time frame. The scale tips towards keeping money in cash if the time horizon is longer, but right now it might be worthwhile to grab 4% for a savings goal of one to two years. Grabbing 4% yields also insures against short-term interest rate falling again which is not economist's consensus forecast, but is also a scenario that cannot be ruled out with a weak economy and the potential for unexpected financial crises.

This week the list of online banks offering 4% yields on CDs increased to over ten, while only EverBank is offering 4.00% or higher on a money market or interest checking account. The EverBank yield is also only an introductory yield which drops after 90 days.

Today's 2-year Certificate of Deposit Rates

IndyMac Bank, 4.20% APY, minimum deposit 5K

OnBank, 4.15% APY, minimum deposit $500

Geauga Savings, 4.00% APY, minimum deposit 1K

E-Loan Bank, 4.05% APY, minimum deposit 10K

State Bank of India, 4.06% APY, minimum deposit 95K

Discover Bank, 4.02% APY, minimum deposit 2.5K

Ascencia Bank, 4.01% APY, minimum deposit $500

AmTrust Direct, 4.00% APY, minimum deposit 5K

GMAC Bank, 4.00% APY minimum deposit $500

Umbrella Bank, 4.00% APY, minimum deposit 1K

Capital One Bank, 4.00% APY, minimum deposit 5K

iGObanking, 4.00% APY, minimum deposit $500

National City Bank, 4.00% APY, minimum deposit 10K, (requires opening checking account)

Find more online banks and rates at Money-Rates.com

FNBO Direct is the online presence of First National Bank of Omaha an old established Nebraska bank who have been offering one of the top yielding savings accounts for close to a year. FNBO Direct has recently announced their Pay Yourself First Challenge in which they will be giving away $45,000 in cash and prizes for the best one-minute videos about what you're saving for.

The contest is being run in conjunction with the Pay Yourself First (PYF) promotion from FNBO Direct which is a savings program which direct deposits into your online savings account then transfers only what you need to pay your monthly bills into your checking account or BillPay account. With the FNBO Direct savings account currently yielding 3.50% this is a good way to maximize interest earnings. The Pay Yourself First Challenge does not require opening an account with FNBO Direct so unlock the Martin Scorcese or Quentin Tarantino in you by entering today.

The prizes include:

$10 Gift Card for each of the first 500 YouTube Submissions

$500 Cash Prizes for each of the Top 20 YouTube Submissions

$7,500 Luxury Spa Vacation Grand Prize

$25,000 in Matched Savings for the Top 5 Contestants

Contestants must have their videos uploaded by July 31, 2008 to participate in the contest.

See official contest rules and disclosures here.

Find a complete list of online bank deals, promotions, and rates.

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.

Last friday's release of a large increase in the unemployment rate and a surge in oil prices spooked financial markets with a carry-over effect to Asian and European markets. With the Federal Reserve expected to keep interest rates steady through the June meeting, this week will see a sharp focus on economic releases to clarify the future of the US economy. The economic calendar will provide plenty to analyze:

Economic Calendar this Week

Monday - Federal Reserve Chairman Ben Bernnake gives a speech at an inflation conference. Bernanke, who just last week gave his public support for the importance of maintaining a strong US dollar is expected to continue the Fed's recent trend of placing the risks of inflation to the economy as greater than the risk of slow or negative economic growth. The new chief of the St. Louis Federal Reserve Bank was quoted Friday as saying the central bank should make fighting rising prices a top priority and other fed officials are on record as shifting their focus from growth to inflation. A strong stance by Bernanke could startle already edgy financial markets.

Thursday - May Retail Sales - Economists forecast that the government's rebate checks will give a boost to retail sales. A negative surprise in this number could create more panic about a recession.

Thursday - Jobless Claims - This is a weekly release which takes a heightened significance after the big jump in the nation's unemployment rate. It should also be a good indication of how successful college graduates have been at landing jobs.

Friday - Consumer Price Index - Economists already know that food and energy prices have increased at an alarming pace in 2008, what will be closely watched is the "core inflation" number to determine if inflation is hitting other sectors. An increase over 0.2% in core inflation will be bad news for the economy.

Friday - June Consumer Sentiment Index - The University of Michigan's consumer sentiment survey will be dissected to determine if consumers believe the worst of the US economic slowdown is past them.

Interest rates will be greatly influenced by this week's economic releases as well. Mortgage rates may decline if financial markets continue to selloff and Treasury yields drop, while short-term deposit rates may increase if it appears likely that the Fed may raise rates by the end of the year to thwart inflation.

The new Find A Better Bank tool now featured on Money-Rates.com does much more than just find banks in your local area - it allows consumers to find the best bank for their particular needs. The tool allows users to rate how important the following banking features are to them:

• Interest on balances
• Overdraft Protection
• Online Bill Pay Service
• 24-hour automated telephone banking
• Email Alerts for balances, transfers, payments or deposits
• Mobile banking services
• Download activity to Quicken or MS Money
• Unlimited check-writing
• Debit Card Reward Program
• Non-Bank ATM Fee Rebate
• Free additional linked deposit account(s) (i.e., savings, money market, checking)
• Free or discounted check-printing services

After taking into account the estimated fees your banking activity typically generates the Find A Better Bank tool then returns a list of banks which best match your needs. In another few steps you can even open an account and switch over from your current bank. What makes this tool completely different from other banking comparision sites is the intelligence behind the scene matching a visitor's banking needs to a list of banks that best matches them. The bank comparision tool is powered by technology from Facilitas, Inc.