MILWAUKEE, Wis. — Credit unions are joining online auctions that allow banks to bid for the CU's investments-and are finding interest rates that are at least a half percent higher than other sources.
"Today I found a rate that was a whole percent higher than what I got through SimpliCD," said David Bieneman, VP and CFO at State Central here. The $67-million CU has about $8 million in investments. SimpliCD is a certificate of deposit (CD) program managed by the nation's corporate CUs, but Bieneman got that 2.2%, six-month CD by putting State Central's funds up for auction on MoneyAisle.com, a free website where FDIC-insured banks bid against each other in real-time to get deposits.
During the three-step process, Bieneman chose whether he wanted a CD or savings account and the amount of money he wanted to invest. Then, he watched as up to 112 banks bid for his deposit, with each bidding round pushing the rate higher. Finally, Bieneman had the option to accept the winning bidder.
"In this lower interest-rate environment, our net interest margins are coming down, so we need to get the best return on our investments," Bieneman explained. "Whoever has the best rates - that's who we choose."
Beyond offering rates that help beat the economic crisis, MoneyAisle "saves resources, as one does not have to look around, compare and negotiate, said MoneyAisle CEO Mukesh Chatter.
For the time being, credit unions aren't able to auction their rates at the site. "MoneyAisle has not seen sufficient demand from credit unions at this point for placing funds. However, that doesn't rule it out in the future; we would be happy to set up a network," Chatter said.
A Better Return On Investments
In addition to State Central, 30 credit unions are using MoneyAisle to search rates. One of them is Chelsea Employees FCU of Chelsea, Mass. "We are receiving a better return on our investments," said Bruce Black, treasurer for the $8-million CU, which has $1.5 million in bank deposits.
"The rates at MoneyAisle are at least a half-percent higher than our investment alternatives."
Since January, Chelsea Employees has purchased three CDs through MoneyAisle auctions, Black added. "The auction option is quick and easy. I know instantly what the best rates are out there and can move forward with my investment decisions."
A Predictable Cash Flow
Bieneman is impressed by MoneyAisle's new CD-laddering option, which offers State Central the option to invest one lump sum in various CDs, each with a different duration, and deliver a predictable cash flow, he said.
"I could enter $100,000 for three-six-and nine-month terms and get the top rates at all levels with just one click in the bidding process," explained Bieneman. "And then I can accept just one or all three of them."
State Central started using MoneyAisle in October, he said. "I view MoneyAisle as an insured CD search-engine. I like the fact that all of the bidding institutions are FDIC- insured. There's a link to the FDIC and the bank's website so that I can look up the financials for the winning bidder, which is very convenient."
Searching for rates at MoneyAisle is better than "googling" for rates, Bieneman continued. "Google can't give me the best rates all lined up in one place."
MoneyAisle keeps brokers at bay, too, Black said. "We use MoneyAisle when we choose and don't have to worry about brokers constantly calling with investment offers."
