Dedicated to Deposits: Deals, Data, and Discussion
DETAILSINSTITUTIONAPYMINMAXPRODUCT
Ally Bank0.87%--No Penalty 11-Month CD
Accounts mentioned in this post. Rates as of August 23, 2014

My Experience with Ally Bank's No Penalty CD

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Ally Bank

If you're looking for a short-term CD with a maturity under one year, you should consider Ally Bank's 11-month No Penalty CD. The no-penalty feature allows you to make the CD have any maturity that you want from 7 days to 11 months. Thus, the only reason to choose a 3-month CD or 6-month CD is if it has a higher rate than this 11-month CD. Ally's 11-month No Penalty CD rate may be low (0.96% APY as of 12/08/2011), but it's higher than the best 3-month and 6-month CD rates available at both internet banks and credit unions.

One reason some people may be hesitant with this No Penalty CD is that they may not think it will be easy to close the CD before the 11-month maturity date. To see if this might be an issue, I gave this Ally 11-month CD a try.

Opening an Ally Bank CD is very easy especially if you already have an Ally Bank savings or checking account. I've always funded an Ally CD using money from my Ally savings account. One feature of Ally CDs came in handy when I opened this 11-month CD. A few days after I opened the CD, the rate went up. Due to the Ally Ten Day Best Rate Guarantee, I automatically received the higher rate.

Before the CD was one month old, I decided it was time to test the closing procedure. Ally doesn't provide a CD management interface. You have to contact Ally with closing instructions. I provided the instructions using Ally's secure online chat service. This can also be done by phone. I wanted the CD closed and the funds transferred to my Ally savings account. I was asked to provide the last four digits of my CD account number and savings account number. After about 3 minutes, the CSR gave me confirmation that the CD was going to be closed and the funds (principal and accrued interest) transferred to the savings account.

It looked like the closing process was going to be quick and easy. However, there was one minor issue. The CD cannot be closed immediately. It takes 2 business days for Ally to process the request. The CSR informed me of this 2-day delay as part of the confirmation. He said it could be sooner, but it turned out to be very close to 48 hours after the closure request.

When the closure and transfer were completed, I checked the transfer amount, and I confirmed that all of the principal and accrued interest were transferred correctly. As promised, there was no early withdrawal penalty. The accrued interest included the 2 extra days it took to process the closure.

If you may need quick access to your money, Ally's savings, money market or checking accounts would be the better choice than the No Penalty CD. If you don't mind the 2-day wait, the No Penalty CD gives you a little higher rate along with an 11-month rate lock.

Ally's rate history over the last 11 months can provide some insights into the benefit of the rate lock. At the start of this year, Ally's No Penalty CD yield was 1.20% and its savings account yield was 1.09%. That savings account yield has fallen to 0.89%. The average yield over those 11 months is approximately 0.99%. So over the 11 months, the No Penalty CD had a yield of about 21 basis points higher than the average savings account yield. That would have resulted in an extra $193 for a $100,000 deposit.

There are a couple of other downsides with the No Penalty CD. First, you can't close the CD before 6 days of funding the CD. Second, you have to close the entire CD. Ally doesn't allow for partial withdrawals.

These downsides are minor, but I don't know if the rate spread of the No Penalty CD over the savings account is large enough to make it worthwhile. The No Penalty CD makes more sense than Ally's lower-rate 3-, 6- or 9-month CDs. In fact, the No Penalty CD makes more sense than Ally's 1-year CD since the 1-year CD rate isn't that much higher than the 11-month CD rate. However, I still prefer Ally's 5-year CD over the No Penalty CD. The 5-year CD rate is much higher, and the small early withdrawal penalty of 60 days of interest is almost as good as no penalty at all. I reviewed Ally's 5-year CD and long-term CDs at other banks and credit unions in my recent blog post Comparing the Best CD Rates After Early Withdrawal Penalties.


  Tags: Ally Bank, CD rates

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Comments
10 Comments.
Comment #1 by Anonymous posted on
Anonymous
If you're a AAA member, you can get a slightly higher rate than the Ally CD with Discover Bank's Money Market Savings Account (Discover Banks gives you a .05% higher interest rate because of your AAA membership).The Discover Money Market Account would allow you to make those partial withdrawals by check, atm, online transfer, (although I wish Discover Bank didn't require the full social security number to register for online banking--happily, other places don't). Discover also offers a savings account and that might be appealing to some. Given that AAA membership is pretty common, the only advantage I can see in a short term is that it locks in a rate, but it's still just locking in a low rate.

1
Comment #2 by Anonymous posted on
Anonymous
A clarification and a correction for my post about the Discover MM savings rate. Discover's .05% "premium' for AAA membership accounts is a premium over their regular rates for the same type of account. More importantly, the AAA rate for that MM savings a/c recently dropped quite a bit and now seems to be .95% (believe the APY is also .95%). Anyway, it still appears to be pretty good for a lot of AAA members even if a no-penalty CD has about the same rate--I wonder if short-term CD's are relatively dwindling in popularity anyway in these days of ultra-low rates.

1
Comment #3 by KenBDG posted on
KenBDG
Thanks for the info on the AAA bonus rates for Discover Bank accounts. I have more details in my March blog post.

1
Comment #4 by cumulus posted on
cumulus
 
 

> It looked like the closing process was going to be quick and easy.
> However, there was one minor issue. The CD cannot be closed
> immediately. It takes 2 business days for Ally to process the
> request. The CSR informed me of this 2-day delay as part of the
> confirmation.
>
This delay is due to the CSR having to pass the request to close the
CD to Ally's backend, where the actual closure of the CD occurs.  If
you really need the funds in your Ally deposit account sooner request
to speak with a manager/supervisor about expediting the CD closing.

I'm not sure about getting things done in the same day ALL THE TIME,
but I have done this twice with Ally (needed the funds quicker to
take advantage of another investment) and in both cases closed the
CD and had the funds in my Ally savings account that same day.

The manager I dealt with (Amber) was excellent in getting this done
but did mention it was processed as a "special request" reserved
for long time customers (me).

9
Comment #5 by Jeanne (anonymous) posted on
Jeanne
Ken, I also have Ally Bank CDs so I am not trying to point fingers. I would just like to point out, in light of your many recent blogs on transferring funds to smaller banks or credit unions, Ally Bank is part of Ally Financial, the former GMAC, one of the "too big to fail" operations. They received $16,290,000,000 (yes BILLIONS) of taxpayer money and still have $11,286,465,618 outstanding. Source: ProPublica "Where is the Money: Eye on the Bailout." That is why they try must harder to raise the capital.

5
Comment #6 by Anonymous posted on
Anonymous
I tried using these things. Online chat CSRs always gave problems at closing time. Wanted to know why, tried to talk you out of it, and did stupid things like say for security reasons, I have to ask you if 555-555-5555 is still your phone number. Absolutely no reason why they can't let you send a secure email which they then say is unsecure if you try to do it that way other than they're trying to make the closing process more painful.

1
Comment #7 by No Stock 4 Me (anonymous) posted on
No Stock 4 Me
BB&T has something like this, only its like a 30 month at the start, but you can close it out after 1 year with no penalty also. Not sure what the rate is at this point with them, last one I did was at 1%. I opened one before that at 1.2%. I only did that cause of the 1 year no penalty closing thing, also I figure if rates still sucked by than I'd just leave it until rates do move, the no penalty is in effect after the 1st year all the way through. Only thing about it is if you do choose to close it, you would want to close the whole thing, as anything left behind will than be subject to their penalty when closed later.

Also the other thing I liked about it was that I could add 10K to the CD after the 1st year (a one time deal) and still continue the same rate it started with. and the closing year thing isn't effected either.

Just another alternative.

1
Comment #8 by Anonymous posted on
Anonymous
I have had very poor service in dealing w/ally CSR's. Presently opened two CDs on 10/27/11, funded via ACH on

10/31/11. Have yet to receive requested letters of confirmation after 43 days.Two phone calls brought typical

scripted excuses.Have had similar problems in the past.CSRS dazzle you w/politeness-but no follow up.Service

is totally incompetent.

2
Comment #11 by Anonymous posted on
Anonymous
I know this is an old thread but I thought I should post here my recent experience trying to close an Ally no penalty CD. I called on 12/7/2013 and they said it would take 2-3 days to close account and 2 more days to transfer funds to my external account. I checked early on 12/13/2013, the fifth business day following my call and did not see funds. I was leaving the country for a week and expected funds to be there when I returned, but they were not. Ally said they had record of my call, but they made a mistake and left account to be closed at maturity, not immediately as I requested. I wonder if mistake was made when I told them I wanted funds to open 3+% account at PenFed.

1
Comment #12 by washerdreyer (anonymous) posted on
washerdreyer
With the current no-penalty rate exactly equal to the current ally savings rate, the only reason I can think of to open one of these is in order to receive Ally's renewal loyalty bonus on a subsequent CD.  Can anyone confirm that they received a loyalty bonus when renewing a no-penalty CD?

1