Saturday, March 14, 2009

Get best rates for your money

There are so many banks. They offer so many savings and certificates of deposit accounts with varying rates. How can you find the best deal? Won't it be great if somebody can announce your intention to open a new savings or certificate of deposit account and ask banks to bid for your money? Won't it be super cool if the banks are also FDIC insured so that you can invest without stress? How about if you can also access reviews from other customers? All cool things. OK, no good idea goes unexploited by smart people. As a result, we have MoneyAisle.

MoneyAisle is really cool. All you need to do is to go to their web site and provide some basic information like amount you want invest, duration of certificate deposit etc. and start the bidding process. The system talks to several banks and finds out the highest possible interest available for your amount for the period you specified. Then if you like, you can accept the non-obligatory bid and choose to open an account with the bank that won your bid or just move on. No commitment from you at any stage.

Before you open your account with any of the banks, please do check the rates offered by your own local bank. Since this is a new service not all banks and more importantly credit unions are not participating. For example, in my case, my credit union offered better rates than any bank that bid for my money.

In the era of failing banks, credit unions seem to be fairing better. I have mainly banked with a credit unions for last 10 years so. I had not-so-great experience with one of these large banks in the earlier days. No personal touch to their service. Callous attitude etc. So, I chose a credit union and been banking with them even though I have moved several times in last 10 years. Most of my accounts remain with a credit union in Boston area. With their excellent Internet portal, I have found no reason to bank elsewhere. I was not sure if they were offering best possible rates. Checking on Money Aisle kinda proved it. So, why bank elsewhere? Credit unions are also insured by something similar to FDIC. So, you money is safe up to $250,000.

Savings accounts and CDs are fairly safe investments. Safety also comes at the expense of investment returns. Highest possible rates for say 3 year CD are in like 3% APR which is less than annual inflation. So, your money is earning less than inflation. But, if you want the safety of your principle, bank deposits are better.

For long term investors, stock market is still a better place to invest. Agreed that definition of long term has definitely changed over years now. Earlier they said 5-10 years. Now with stocks close to their 12 year lows, probably horizon now is 20 plus years. But, that's ok. Ask yourself if you believe in the basics of capitalism. If you do, then act like a investor and stay put invested in a diversified portfolio of entire US market plus some exposure to international market. Chances are you will create enormous wealth for yourself and your next generation in next 30-40 years. If you want the safety of retaining your principle, then open certificates of deposit and sleep soundly that your $1000 remains as such although today's $1000 may be less than half after few years of 4% inflation.


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