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Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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DETAILSINSTITUTIONAPYMINMAXPRODUCT
Ally Bank0.87%--No Penalty 11-Month CD
Accounts mentioned in this post. Rates as of July 30, 2014

How Ally Bank Has the Best CD Rates For Most CD Maturities

POSTED ON BY

If you're looking for a short-term CD with maturities under 1 year, you will probably be very disappointed. The short-term CD rates are so low that it's hard to justify a CD rather than an internet savings account. The only benefit of the CD is that you don't have to worry about the rate falling during the term.

If you still want a short-term CD, it's hard to find one that's better than Ally Bank's No-Penalty 11-month CD. The rate isn't that great (1.20% APY as of 2/9/2011). However, if you compare that to the best rates available for 3-month, 6-month and 9-month CDs, it's very competitive. Here are the best nationally available short-term CD rates as of 2/9/2011:

There's no reason to pick these short-term CDs rather than Ally Bank's No-Penalty CD based on the current yields. With the No-Penalty CD, you can close the CD early any time after the first 6 days of funding the CD. At closure, you'll receive the full balance and accrued interest without any early withdrawal penalty. So this effectively gives you any maturity that you want with terms from 7 days to 11 months.

Better Deal Than The No-Penalty CD

If you think it's likely that you will leave the CD untouched for at least 4 months, there's even a better choice. Ally Bank's 5-year CD has only a 60-day early withdrawal penalty. Its rate is 2.39% APY as of 2/9/2011. So if you close the 5-year CD after 120 days, you'll lose half the interest. Thus, the post-penalty yield becomes around 1.20%. Each additional day that you keep the money in the CD, the yield will go up. Here are some additional post-penalty rates for other terms:

  • 1.60% at 6 months
  • 1.87% at 9 months
  • 2.00% at 1 year
  • 2.20% at 2 years
  • 2.26% at 3 years
  • 2.39% at 5 years (no penalty)

As you can see, these rates are much higher than what you can get with short-term CDs at other banks. Allan Roth in his CBS MoneyWatch blog post has a review of this feature and his approach of maintaining multiple Ally 5-year CDs. As I mentioned last year when I first reviewed this Ally CD 60-day penalty, Ally doesn't allow partial withdrawals. So it makes sense to open multiple small CDs rather than one big CD. So if you need some money, you don't have to close the one big CD.

I compared Ally's 5-year CD with some other high-yield long-term CDs in this Ally and PenFed review post. I don't have any updates to the potential risks of long-term CDs that I discussed in this November blog post. This includes the risk that the bank could increase the early withdrawal penalty on existing CDs. I've received an assurance from Ally's public relations director that the penalty would not be increased on existing CDs.


  Tags: Ally Bank, CD rates

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Comments
29 Comments.
Comment #1 by Anonymous posted on
Anonymous
It is a no brainer. Ally has found a way around FDIC scrutiny by making the penalty ridiculously low.

14
Comment #2 by tommyvjr posted on
tommyvjr
american express savings 1.30% no mim,  why lock it up?

4
Comment #3 by Anonymous posted on
Anonymous
@tommyvjr

"why lock it up?". Well for a higher rate. I locked with Ally 1 year ago for 3.25% for 5 years. When Ben and the feds will announce they have to buy more bonds after the June dealine, 2.39% will sound good.

8
Comment #4 by Anonymous posted on
Anonymous
there's still 2.5-2.75 apys around for 5 yrs.  2.39% doesnt sound that great.  being able to break  the cd isnt 100% guaranteed.

2
Comment #5 by Anonymous posted on
Anonymous
"being able to break  the cd isnt 100% guaranteed"

 

Are you saying that the bank may refused access to your own money?

3
Comment #6 by shinoby posted on
shinoby
Trust me.  Anybody who opts today for an 11 month at 1.2%, and who plans to leave the money alone for the full 11 months, is going to be unhappy tomorrow.

Stuff is about to happen.  It's coming from the D.C. area.  It's a game changer.

9
Comment #7 by Anonymous posted on
Anonymous
shinoby -#6

Hmmm.  Are you trying to imply that you have some sort of 'insider' information that the rest of us do not yet have?    

4
Comment #8 by Om (anonymous) posted on
Om
The Dime 1.65% APY* 10-Month CD

1
Comment #9 by tommyvjr posted on
tommyvjr
thats why tommyvjr #3  says "why lock it up"  I agree with Shinoby #6

1
Comment #10 by Anonymous posted on
Anonymous
You have to have a checking account with Dime to get that rate.  With the 1.30% with Amex they can lower that rate at anytime. 

1
Comment #11 by Anonymous posted on
Anonymous
Reply to Anonymous #5:

They may refuse access to "your own money" if you try and break the CD.  They can lawfully refuse, or change the penalty.  When you take out a CD, it's a contract.  If they agree to let you break it, they can set the terms.

3
Comment #12 by Anonymous posted on
Anonymous
I contasted Ally via chat and asked if they reserve the right to refuse early withdrawal on their 5-year cd and was told that they do. I read the deposit agreement but couldn't find any reference to it. That being said, if rates were to rise and you opted to cash out, that clause would enable Ally to keep you locked into the cd for the full 5-year term. I would like to see if that is in the deposit agreement.

1
Comment #13 by Anonymous posted on
Anonymous
Can Bank really refuse to give original deposit back (forget the interest) if you break term?

1
Comment #14 by Anonymous posted on
Anonymous
Whether it be Ally, or anyone else, if it would be to their benefit, in a material degree at the time, I believe that they would somehow find a way to restrict an early withdrawal entirely or charge stiff withdrawal penalties, or both. They would probably find a way to do this even though such measures are not clearly stated when the CD is initiated. The idea that a CSR answer to the contrary,  or some random opinion to the contrary by one or more experts, is not very reassuring. What is needed, is a regulation, ruling or law that clealy and specifically states what an institution can do,  and can not do, in the event a depositor wishes to redeem early.  This is bound to be a fairly routine occurance and why no such uniform regulatory authority or basis exists is a mystery to me. This situation may not normally be of that critical of a nature but if, for some reason, a mass exodus of deposits should begin to occur, then depositor beware.  

6
Comment #15 by Anonymous posted on
Anonymous
I also asked if they could change the 60 day early withdrawal penalty after a 5-year cd has been opened? They said no! Which is a worthless promise if they refuse to honor your request for an early withdrawal. It sounds like a crap shoot. I'm prone to believe as stated above, that if interest rates rise they could use this technicality to prevent a sudden drain on Ally bank cash reserves.

3
Comment #16 by Anonymous posted on
Anonymous
The premise that one can break a CD if rates rise is faulty.  1) The bank can refuse 2) They can change the penalty.    Sorry, but it's not a great strategy.

5
Comment #17 by InterestYields posted on
InterestYields
The 60 day penalty (except for their No Penalty CD) is explicit in Ally's deposit agreement:

( http://www.ally.com/files/pdf/ally-bank-deposit-agreement.pdf )

"Certificates of Deposit — With this account, while an actual certificate is not issued, you will receive a funding letter with all the pertinent information about the certificate of deposit (“CD”). Except for the Ally No-Penalty CD, if you need your funds before the end of the term, your CD is subject to a 60-day interest penalty that is described below." 

"• Early Withdrawals — You may not make a partial withdrawal of funds you deposit in a CD prior to the maturity date. If you withdraw all of the funds you have deposited in a CD prior to the maturity date, we will close your CD, add the accrued interest to date to the balance and impose a penalty on your early withdrawal. The penalty imposed will equal sixty (60) days of interest. This penalty does not apply in the case of death or legal incapacity of any owner or in the case of the Ally No Penalty CD, which does not allow withdrawals on the date you fund your account or during the first six (6) days following the date you fund your account (except for the death or legal incapacity of any owner). If you have a Raise Your Rate CD, the 60-day interest penalty will be calculated using the interest rate that applies to your Raise Your Rate CD at the time of your early withdrawal."

Thanks Ken, this post describes my thoughts & original post:

http://www.depositaccounts.com/forum/thread/2343-allys-5-yr-cd-with-its-60-day-early-withdrawal-penalty-advantage.html

Principal-protected (but less liquid) seeking funds are in their 5 yr CDs & more liquid seeking cash funds are in their No-Penalty CDs but now that the CPI (which doesn't accurately reflect energy costs) is officially higher than their No-Penalty rate I'm considering risking some more funds to higher yielding (but not principal-protected) dividend paying stocks (e.g. http://finance.yahoo.com/q?s=VZ , http://finance.yahoo.com/q?s=KMP ) or perhaps sticking to Ally's 5 yr CDs..  

Anyone else feeling more forced into this market?  Appreciate some constructive thoughts here.. 

1
Comment #18 by tommyvjr posted on
tommyvjr
Let's remember banks are press for your money, they are not going to make it easy for you to get your money back, i'm not gonna trust this early withdrawal. Just what happens if they refuse to break your CD. Are you prepare for it?  This is why i'm going with american express for 1.30% till i see a better cd rate

1
Comment #19 by shinoby posted on
shinoby
I know the secret to successful early CD redemptions.  This works every time and the path to success can be stated very succinctly:



Don't be late.

 

That's all there is to it.  You don't want to be in the herd when everyone is rushing simultaneously for the exit.  You must redeem your CD early on, when there's only just a hint in the air of the impending stampede.  Point is, if you are able to anticipate events only slightly (not by months, weeks will do it) you will be fine.

For those who might delay too long, though, I agree with others here that locks might be placed on the exit door.  At that point, again agreeing with the wise heads here, at that point the penalty simply will not matter.

The early bird gets the worm.  And the early bird sees the (early) return of his CD money.

 

Speaking strictly for mysef, and not intending to convert you to my way of thinking:

I'm not confident I will be able to know, sufficiently far in advance, the correct exit point.  Events move so quickly today.  It's a concern for me.  And the idea of having my money locked up for years at a low rate of interest is unattractive.  So I will place my bet on the higher rate short term CDs which I believe are right around the corner.

9
Comment #20 by Anonymous posted on
Anonymous
The business model of GMAC/Ally is uniqe. They primarily use invester money to fund car loans. That being said the car industry is a rather unstable industry with extreme financial problems. I believe if any bank were to set a precidence by refusing early withdrawal, it would be this type of bank.

3
Comment #21 by Anonymous posted on
Anonymous
@shinoby,

You are implying that you know something that we do not. In the past people who tried to time the market have failed unless lucky or given insider info.

Since you can't predict your luck, I must assume you either know something or like many others are willing to make a bet. My bet is that the rates will not move much for years as any rate increase will cause economic pain, a market sell off and a new run to safety.

 

As for the banks refusing access to your money, this could happen with Ally or Amex I guess.

You can have a 5 year CD or a MM account and be denied access to your money. That scenario is that of a default of the feds including the FDIC. I am not an optimist but I do not see that scenario likely to occur.

2
Comment #22 by shinoby posted on
shinoby
#21

 

I have high regard for your thinking, along with the thinking of other posters here.  Ken's website attracts many good, sagacious readers/contributors.  So I offer this counsel with all due respect:

 

Don't bet the farm.  

6
Comment #23 by Anonymous posted on
Anonymous
@shinoby,

 

So what do you know that we don't?

Get you put a date on it?

1
Comment #24 by Anonymous posted on
Anonymous
Some of you must watch a lot of history channel or belong to a militia to be so inclined to have such odd or conspiracy tending beliefs.

15
Comment #25 by Anonymous posted on
Anonymous
I would agree with anonymous #24.

Saying that the end is near and referring to some obscure event in DC to support a speculative opinion is a coomon feature of conspiracy theorists.

This being said, it is not because you have paranoia that no one is following you and even a broken clock gives the right time twice a day. So maybe something is brewing......OH!! Can smell the coffee and it is time for a break!!

5
Comment #26 by Anonymous posted on
Anonymous
Some of you are giving to much credit to the feds ability to hold the feds rate at these ridiculously low levels. There are already repercussions showing in the stability of the overall economy because of this desperate attempt to stabalize and reinflate the housing market and stimulate the economy. It's not going to work and inflation is starting to rear it's ugly head and that will eventually force the feds hand to tighten. The fed is always behind the curve on their monetary actions. Once they start tightening it will be a succession of fed rate increases as it always is because they will have waited to long as they always do. They should be tightening right now instead of making excuses for the inflation that is already creeping into the economy (ie. gas (oil), food, etc.). The 0 rate at the discount window is giving the banks unprecidented liquidity at the tax payers expence but is doing nothing for the housing market or to stimulate the economy. The banks have little incentive to loan money and shoulder risk at the current low interest enviorment. There is no such thing as a jobless recovery, no jobs, no spending, printing money all create inflation. The only way to combat inflation is to raise interest rates. 

7
Comment #27 by Ray (anonymous) posted on
Ray
Noticed that Ally lowered their rate on the "No Penalty" 11 month CD

Down from 1.20 APR to 1.15 APR 

1
Comment #28 by Anonymous posted on
Anonymous
There is also the issue of what would happen to the early withdrawal penalty if Ally is taken over by another bank.  When I opened my WAMU checking account it was guaranteed (in writing) free checking for life;  they even had a large television campaign ballyhooing this.  Now that Chase has taken over, so much for that guarantee.  I assume the same thing could potentially happen to whatever promises Ally makes now, especially one that appears to not have very much written support.

Maybe I'm overcautious or even foolish, but my trust in bank promises that extend past anything required by law is essentially nonexistent.

3
Comment #29 by Itsallthesame (anonymous) posted on
Itsallthesame
I agree with tommyvjr

1