Dedicated to Deposits: Deals, Data, and Discussion

Tips on Opening an Ally Bank Certificate of Deposit

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Ally Bank

News of Ally Bank's small early withdrawal penalty may be spreading. Ally continues to cut rates which gives me the impression they're seeing strong demand. The 5-year CD yield is now under 3% (2.99% APY) as of 4/3/2010.

Even though you can get better rates on a 5-year CD at other banks, Ally Bank's small early withdrawal penalty still makes the Ally CD a deal. There have been concerns about the possibility that Ally could increase the penalty on an existing CD. As I described in this post, I've received assurances from Ally's Public Relations Director that Ally would honor the terms of the CD until maturity which is what we should expect from any bank or credit union. I was told that Ally CSRs are being trained on this issue, and you should be able to get your own assurance directly from Ally's CSRs.

So if you decide on opening an Ally CD, here are some CD features and tips:

  • Ally Bank does not allow partial withdrawals of the CD. A withdrawal of any amount of the principal will cause the closure of the entire CD.
  • Because of the above feature, it makes sense to open multiple small CDs rather than one big CD.
  • One potential issue with opening multiple CDs is that it could trigger a fee if you use a savings or money market account to fund the CDs. The withdrawal for each CD would be counted towards the 6-per-month withdrawal limit for all savings and money market accounts. This is true for Ally and all other banks. If you plan to open several CDs, you may want to consider opening Ally's checking account, and using the checking account to fund the CDs. Note, opening the checking account would likely not be useful if you want to immediately open the CDs.
  • When you close an Ally Bank CD, you have to contact an Ally CD who can submit the closure request. This can be done by phone or secure email while logged into your account. According to the CSR, it'll take 3-5 business days to see the funds in your external account if you choose an ACH transfer. A check that's mailed will take about 5-7 business days from the request. The best option is if you have an Ally savings or money market account. In that case it'll take only 1 business day according to the CSR. The above info is based on what I received from an Ally CSR in January

For more details about Ally Bank and this early withdrawal penalty, please refer to the post Huge Change to Ally Bank CDs Will Benefit Savers. To see more of my Ally Bank posts, please refer to the Ally Bank blog posts page.


Related Pages: Ally Bank, CD rates

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Comments
6 Comments.
Comment #1 by Carly (anonymous) posted on
Carly
I opened a CD at Ally last year that just came due, and I received a .25% bonus to renew, which pushed my 5-year CD to 3.24%.

1
Comment #2 by Anonymous posted on
Anonymous
Ally's Deposit Agreement allows it to change the early withdrawal penalty at any time upon written notice.  It is perfectly legal under the FDIC regulations to do so (I confirmed this with FDIC).  Despite any assurances you may get to the contrary, under the current Deposit Agreement Ally may change the CD terms if such a change will benefit its business.

4
Comment #3 by Tom C (anonymous) posted on
Tom C
If the previous post is correct, then Ally is not a great deal.  The previous post says:

Ally's Deposit Agreement allows it to change the early withdrawal penalty at any time upon written notice.  It is perfectly legal under the FDIC regulations to do so

2
Comment #4 by Anonymous posted on
Anonymous
I have A CD maturing with them soon and  I can't find anything on their website about the loyalty bonus but when I talked to the rep he says it must be negotiated with them and could range from .25 to .50 %. Also asked about the penalty and he mentioned it could be changed at anytime and you will definetly be notified. Should of asked if I could still close the cd out at the 60 day penalty after being notified.

2
Comment #5 by Jay (anonymous) posted on
Jay
I noticed their "raise our rate" 2-year CD which allows you to raise your rate once during the term of the CD.  Is this a gimmick, or a good hedge?

1
Comment #6 by Anonymous posted on
Anonymous
One potential issue with opening multiple CDs is that it could trigger a fee if you use a savings or money market account to fund the CDs. The withdrawal for each CD would be counted towards the 6-per-month withdrawal limit for all savings and money market accounts.

This might be the case if you transfer the funds online, but there is a better way: I recently opened several Ally CDs and did not have this problem. I transferred the funding money to my online savings account and then called a CSR to have the money moved into the previously opened CDs. Ally's back office made a single large withdrawal from my online savings and disbursed it into the CDs. Result: 1 withdrawal, not several.

1