Better rates on cash

I know all about the online savings accounts offered by HSBC Direct, EmigrantDirect, or ING Direct. An article in BusinessWeek led me to a site where I found better rates on cash than those offered by these online savings accounts. From the article:

Like many retirees, John Urban shops for the best rates on the CDs and money-market accounts that make up a large chunk of his portfolio. The 65-year-old Bristol (R.I.) resident scours the Internet looking for banks offering the highest yields, but lately he often finds the best deals at an online auction run by Zions Direct, a division of Salt Lake City-based Zions First National Bank.

At Zionsdirect.com, the company generally runs five auctions a week of $1,000 CDs, typically with 1- to 18-month maturities. Since debuting on Feb. 27, it has conducted 59 auctions, approximately 60% of which have netted participants rates above the highest available at the time on Bankrate.com, which tracks rates nationwide, according to Bankrate's own analysis. Urban, who purchased CDs in six auctions so far, says he checks advertised rates at local banks and on Bankrate.com and then submits a bid for a slightly higher yield. "You win some and you lose some, but the rates I've gotten I wasn't able to find elsewhere."

I did a quick comparison of the latest rates Zions displayed on https://www.auctions.zionsdirect.com/, and they generally seemed at or higher than the best rates I could find through bankrate.com. The calendar of upcoming or in progress auctions is located at https://www.auctions.zionsdirect.com/calendar.

With CDs, the cash put in is generally tied up until the CD matures. Presumably this won't be an issue for the mass affluent segment with a high level of liquid investible assets. I can also spread out the investment over several CDs, investing say 1/6 of the cash in a 6 month CD every month for 6 months, and then rolling over the cash if it wasn't needed. If it was needed, there would be a CD maturing every month which would provide cash.