Save! America: Last Chance to Win $5,000

I just wanted to send out a quick reminder to everyone that MoneyAisle's "Save! America" sweepstakes is ending tomorrow, July 31. If you haven't registered to win a $5,000 High-Yield Savings account secured through a MoneyAisle auction, you have a little over 24 hours in which to do so.

Response has been great so far, and we'll be announcing the winner shortly after the sweepstakes ends. If you haven't registered yet, you still have a chance to win. Just head over to MoneyAisle and click on the "Save! America" banner to sign up to win a $5,000 High-Yield Savings account.

EDIT: Sweepstakes has ended. We'll be announcing a winner soon. Good luck to all who entered!

Future of ECommerce

Hello, all - I wanted to point you in the direction of a radio interview our CEO (and fellow blogger) Mukesh Chatter did for the Market Edge radio show. Mukesh discusses the future of ecommerce, including his background in telecommunications, and, of course, there's plenty of information about MoneyAisle, the next generation online auction marketplace where consumers find great rates on bank CDs and High-Yield Savings accounts.

You can listen to Mukesh's interview here.

A Lack of Savings?

An editorial in this Sunday’s Boston Globe, An addiction to borrowing…, touches on the oft-discussed theme of a lack of savings in U.S. households.

Here's the quote that caught my attention:

Last week, The New York Times published chilling data on the imbalance between Americans' saving and borrowing. In 1920, the average US household had annual savings of $1,200 (in today's dollars) and had $4,400 in total debt. In 2008, the average household is on pace to save a measly $400 a year - even though incomes have risen significantly - and owes $118,000.

Is this - and other frequently cited figures about the miniscule rate of savings in the U.S. (especially when compared to other countries) - really true? An average U.S. household contributes 7.5% towards social security (equally matched by the employer) resulting in a minimum 15% savings per year.

This is further enhanced by contributions to a 401K, boosting the net savings to close to 20-25% of the annual household income. If an employer has some matching contribution to a 401K, this rate is even higher.

The overwhelming population of most countries, especially India and China, do not have such social safety nets and, therefore, the households are forced to save towards their retirement - resulting in a very high savings rate.

However, the results are actually comparable when seen in this context, so the idea that somehow a U.S. household just borrows and spends without any level of meaningful savings is just not correct.

I would love to hear your thoughts on this.

What I've Been Reading 7/25/08

The New York Times has a good article on the housing bill (which I've mentioned a few times before) and ways consumers may benefit from it. Of special interest to first-time home-buyers.

Speaking of the Fannie Mae / Freddie Mac bailout, CNN Money asks: Fannie's New Watchdog: All Bark?

Blogging Away Debt makes some very interesting points regarding the proposed new rules for credit card companies.

Have you come across any interesting articles recently?

Share Your Stories

Update from previous blog: The House have approved the Fannie Mae / Freddie Mac bailout, and the bill moves to the Senate now, where it's expected to be passed by a narrow margin by the end of the week. As stated in my prior entry, I have mixed feelings about this.

But enough Fannie Mae / Freddie Mac talk: I'm here to talk about the exciting new button over on the right-hand side of this blog -
we want you to write in and share your tips and ideas on how you save money. We figure that in this current economic climate, people need all the tips they can get, and if you've got a good one you'd like to pass along we'd love to share it with everyone. Just shoot an email over to share@moneyaisle.com and tell us that it's okay that we use your tip on the blog.

One thing I've noticed lately is that some gas stations are charging less for gas (up to six cents a gallon) if you pay in cash rather than credit/debit. It's gotten to the point that I make sure I have cash handy when I know I'm due for a fill-up. I'm in Massachusetts, so I don't know if this is a regional thing or not - if those of you in other parts of the country have noticed this as well, please sound off in the comments.

Fannie Mae and Freddie Mac - The Proposed Bailout

Earlier today, Treasury Secretary Henry Paulson called upon Congress to pass the administration's plan to help troubled mortgage financiers Fannie Mae and Freddie Mac. The Congressional Budget Office says this could cost taxpayers upwards of $25 billion.

This has many people divided - on the one hand, it could help stabilize an already faltering economy. On the other hand, is it really the government's business to bail out these companies who, it can be argued, got themselves into this situation. When I was looking to get pre-approved for a mortgage a couple of years ago, I know that the number I could have had access to was far higher than I could have been realistically expected to pay - I could have bought the Bat-cave or something with what they were willing to give me. Now it's somehow shocking that all of these loans are being defaulted on.

Maybe Fannie Mae and Freddie Mac can apply for a loan to get out of their current predicament. At an adjustable rate, of course.

Requiem for the Paper Deposit

Since the early part of this century, the paper check has become an endangered species. Once a staple in every purse, wallet and desk, even so popular to warrant its own carrying case, paper checks are a dying breed.

When was the last time you saw someone at the grocery store or in line at Best Buy actually break out that leather-bound checkbook and fill out each line to complete their purchase. It’s a rare sighting, often met with aggravation from those using the much quicker debit card.

While the steady decline of using a checkbook to purchase goods has become quite noticeable, recent news shows that how we deposit checks could soon change as well.

In a post on the NY Times’ Bits blog, Saul Hansell wrote “Soon you will be able to deposit checks by scanning them at home and sending them electronically to your bank. No need to visit a branch or even an ATM.” This is possible because of the Check Clearing for the 21st Century Act, passed in 2003, which allows banks to exchange electronic images of checks. Hansell notes that “Already about half of all checks are scanned by businesses or the banks they are deposited into and not shipped in bags back to the banks on which they were drawn.”

Does this mean that everyone who used to allot their early Saturday mornings to go and deposit checks at their local branch, now just has to visit their online banking site and use a standard home scanner to import checks? It’s not far off. Also, everyone who has adapted to new technology and just deposits checks at ATMs, they'll stay at home as well and the amount of ATM transitions will drastically decrease. Depositing checks in your pajamas, that’s a new one.

Regardless, this new technology will no doubt push local bank branches to evolve like never before.

I would love to hear your thoughts on this. Would you use such a service? What new technology do you see changing the banking industry?

What I've Been Reading

There have been a lot of interesting news articles and blog posts related to online banking and finance lately. Here are some links to items I've found interesting, educational, or entertaining.

CNN has a great article on making sure your investments are safe, particularly in the wake of IndyMac's recent collapse. Check it out here.

The Consumerist compares a bank run in 2008 with a bank run in 1912, with visual aids. Click here to see.

The blog The Story recently posted an entry about MoneyAisle, and had some observations and questions about everybody's favorite online auction site for CDs and High-Yield Savings accounts. Bonus: Special guest appearance by yours truly in the comments section. Check it out here.

Philip Brewer at Wisebread turns down free money. Click here to find out why.

Seen anything good on the Internet recently? Get in touch. We'd love to hear from you.

MoneyAisle on TV

Last night FOX25, the Boston FOX affiliate, ran a news piece about MoneyAisle that we thought we'd share with everyone through the blog. You can check out the piece by clicking here or on the image.

Our rates are even better right now than they were when the interview was conducted - and, as the piece shows, they were high even then. You can see for yourself by running a MoneyAisle auction for a CD or a High-Yield Savings account.

If you want to keep yourself abreast of the various appearances of MoneyAisle in the media, our In the News page is constantly being updated. We were able to add quite a few items yesterday (including a great PC World article), and we've got some more t.v. and radio appearances in the pipeline. Stay tuned!

Certificates of Deposit (CDs) Explained

At MoneyAisle, one of our goals is to make banking easy and enjoyable. We want to serve as a resource for young savers, first time depositors or anyone interested in learning more about the financial world. One of our first product offerings is Certificates of Deposit, so we thought it appropriate to offer some helpful hints about CDs and provide a few useful links for those interested in a more in-depth tutorial.

3 Key Things to Remember About CDs:

• Certificate of Deposit (CD) - A special type of deposit account with a bank or savings & loan institution that is held for a stated period of time and typically offers a higher rate of interest than a regular savings account. A fixed rate of interest is paid on the CD, usually at regular intervals. The rates of interest paid on CDs can vary widely across different banks and regions – and can be as wide as 2-4 percent points. MoneyAisle has banks bidding for your business in live auctions to provide you with great rates on CDs.

• CDs are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000 per depositor per insured institution, or up to $200,000 per joint account per insured institution.

• Banks are allowed to charge a penalty for early withdrawal of the deposit. These penalties vary widely from bank to bank.

CDs are generally low-risk investments while other investments, such as stocks, can be more volatile and are not FDIC-insured.

Useful Websites:

• FDIC info on CDs and deposit insurance: http://www.fdic.gov/deposit/deposits/index.html

• U.S. Securities and Exchange tips for investors http://www.sec.gov/investor/pubs/certific.htm

• Forbes’ Investopedia: http://www.investopedia.com/

• About.com’s Investing for Beginners - http://beginnersinvest.about.com/cs/banking/a/062501a.htm

• The MotleyFool – http://www.fool.com

As we discussed in our blog post from MoneyAisle's launch, MoneyAisle enables depositors to capture the best CD rate available in our system, not just the best advertised rate.

We welcome any comments or questions you have about CDs or MoneyAisle, so please fire away.

MoneyAisle Awarded 'Best of the Web'

We've got more great news to share with everybody: Online Banking Report has just given MoneyAisle its OBR Best of the Web award, through the site's NetBanker blog. From the site:

Online Banking Report (OBR) Best of the Web awards are given for products that "raise the bar" in online financial services.

Past winners of the award include PayPal, LendingTree, and TurboTax.

We're incredibly honored to receive this (one month after we launched - what a cool birthday present!) and excited that MoneyAisle's innovative methods for matching consumers with banks is gaining attention in the wider online financial sphere.

Highest Rates on CD Auctions

Regular readers may remember that last week we posted an Associated Press video reporting on MoneyAisle and how the auction rates compare to the other big rate aggregator sites out there. In that post I predicted that as we added more banks to our network our rates would get higher, to the point where we would wind up beating the top rates at these aggregation sites.

Well, I may need to start a lucrative side-career as a psychic, because as of this writing MoneyAisle's auction rates are at the top of the heap for 3-month, 6-month, and 12-month CDs. That accounts for 90% of the market! We're ahead of the pack for 3 and 12-months, and tied for the top on 6-month CDs. The only higher rates on the top rate aggregation sites are from Indymac Bank, whose current financial troubles (according to recent news reports, funds are being withdrawn at a rapid rate, and it is no longer "well-capitalized") were remarked upon in this space yesterday.

There's never been a better time to run a MoneyAisle auction. Try it out for yourselves - I predict you'll like the results.

On Indymac Bank's Troubles and Protecting Your CD and High-Yield Savings Investments

Today's New York Times has a startling article online about Indymac Bancorp, which says it "will eliminate 3,800 jobs and stop making most home loans after regulators concluded it was no longer 'well-capitalized.'"

With so many of Indymac's customers withdrawing deposit funds at such a rapid rate - $100 million last week, according to the Los Angeles Business Journal - it reinforces to me one of the key decisions made when starting MoneyAisle: all of the banks in our network must not be rated low by the reputable bank rating firm we use. If the bank does not meet these standards (meaning: if it does not have sufficient deposit funds on hand) then it will not be among the many higher-rated banks bidding for your business during a MoneyAisle auction. It's yet another safeguard we use to protect your money and investments.

A Glossary of Commonly Used Financial Terms (#2 in an Occasional Series)

With all the talk over the past few months about interest rate cuts, it’s a good time to discuss the many different terms associated with various rates. These are all terms you may encounter throughout your banking experiences. As with my last glossary term post, these definitions were originally found at InvestorWords.

Federal Reserve Board: The Board of Governors that oversees Federal Reserve Banks, establishes monetary policy (interest rates, credit, etc.), and monitors the economic health of the country. Its seven members are appointed by the President subject to Senate confirmation, and serve 14-year terms. (http://www.investorwords.com/1910/Federal_Reserve_Board.html)

Inflation Rate: At its most basic level, inflation is simply a rise in prices. Over time, as the cost of goods and services increase, the value of a dollar is going to go down because you won't be able to purchase as much with that dollar as you could have last month or last year. (http://www.investorguide.com/)

Adjustable Rate: Any interest rate that changes on a periodic basis. The change is usually tied to movement of an outside indicator, such as the prime interest rate. Movement above or below certain levels is often prevented by a predetermined floor and ceiling for a given rate. For example, you might see a rate set at "prime plus two percent". This means that the rate on the loan will always be two percent higher than the prime rate, which changes regularly to take into account changes in the inflation rate. For an individual taking out a loan when rates are low, a fixed rate loan would allow him or her to "lock in" the low rates and not be concerned with fluctuations. On the other hand, if interest rates were historically high at the time of the loan, he or she would benefit from a floating rate loan, because as the prime rate fell to historically normal levels, the rate on the loan would decrease. (http://www.investorwords.com/104/adjustable_rate.html)

Fixed Rate: A loan in which the interest rate does not change during the entire term of the loan. (http://www.investorwords.com/5892/fixed_rate.html)

To further clarify the terms outlined above, the article “Basic Economic Concepts: Inflation, Interest Rates and the Fed” is a good reference. With all the economic discussion in the news today, I hope this helps you understand the meaning around common phrases.

AP Finds MoneyAisle Promising New Technology

Great news at MoneyAisle – the Associated Press was so captivated by the concept of having banks bidding for consumers' business that they just released a comprehensive review of the site. You can check out the video version of the story above (which also ran on U.S. News & World Report, but you have to sit through a short ad to watch that, and I didn't want to muddy the waters regarding our decision to keep MoneyAisle completely free of advertisements). The bottom line? AP recommends that consumers try our stress-free, easy to use service.

However, it's telling that MoneyAisle managed to tie or win even a few of my head-to-head tests. In fact, sometimes the top rate revealed by MoneyAisle was better than what the winning bank was advertising on its own Web site. This means the service has promise.

We're excited to be called a promising new banking technology – because we're still only in our first month of operation and improving the site every day. It would have been great if the reporter had gotten the best rate available on the Web during every auction he ran run, rather than some of the time, but it does illustrate the point that MoneyAisle auctions are actual auctions, not an automated rate calculator. MoneyAisle has nearly 100 banks in our network bidding for your business - a number that is growing every week - and as our network of banks increases our rates will improve until that does happen. As we approach our second month of existence, we're already competing head-to-head with the aggregated stagnant rates found at rate comparison sites. After all, those sites have been around for years.

If you want to see the rates for yourself, you can do so by going to MoneyAisle.com. As the Associated Press put it:

...there's no downside in trying MoneyAisle. You don't have to commit to investing anything before you see the results of an auction. Not only is the best rate revealed, but so is the institution offering it. It's likely you've never heard of the bank that wins your auction, but all accounts opened with MoneyAisle's participating institutions are federally insured up to $100,000. These factors make these auctions stress-free…

In other words – there's nothing to lose and every thing to gain!

In closing, to paraphrase President Bill Pullman (in that movie where Jeff Goldblum and the Fresh Prince fight off an alien invasion with a laptop computer), tomorrow is the day we celebrate our independence. MoneyAisle wishes everyone a safe and happy Fourth of July.

A Success-Based Model for Executive Pay

The recent stock market fluctuations have me thinking about excessive executive pay. One article touching on the subject that has stuck with me the past few weeks was by Gretchen Morgenson - How Big a Payday for the Pay Consultants? Here's an excerpt:

Even as the stock market flags and credit losses mount, executive pay marches higher. Ousted chief executives also continue to reap rich going-away gifts. Martin Sullivan, lately deposed as chief executive of A.I.G., may receive $68 million in severance as he makes his way out the door, according to the Corporate Library, a governance research firm. Never mind that his shareholders lost 41 percent of their market value since he took over the company in March 2005.

The question this raises to me is: if a company's management is acting on behalf of its shareholders, why is there such a disconnect between the prosperity of the shareholders and executive pay? I'm continually reading about "golden parachutes" - lavish compensation packages to executives following a tenure with unsuccessful results.

This blog is a forum to raise issues, but also one to propose solutions. Taking a long-term view, where the interests of both the shareholders and the executives are aligned, makes sense to me.

Suppose executive pay was based on a sliding scale of the average of the stock price from the previous three or four years? This would tie, in a very real way, the success of the company to the success of the executives. It would provide incentive for growth and increased profits. I'm a strong believer in success-based models - it's one of the principles of the MoneyAisle system, where a bank only pays us a fee after they've successfully acquired a new customer. I see no reason why a success-based model can't be equally applied to the boardroom.