Ally Bank is the first major online bank to cut its savings account rate after the Fed opened the door to rate cuts at its meeting last week. This morning, Ally Bank’s Online Savings Account APY fell from 2.20% to 2.10%. The same rate cut also took effect to the IRA Savings Account. No other rates changed at Ally Bank today.
I had not expected the online banks to cut their savings account rates before the Fed actually started to lower the federal funds target rate. Even before the Fed meeting last week, signs have been pointing to falling rates as large declines in long-dated Treasury yields resulted in inverted yield curves. Once the Fed opened the door to rate cuts at its last meeting, online banks were quick to cut their CD rates, and now the cuts to savings account rates are starting.
Another trend that may be impacting rates at Ally Bank is their growth in deposits. Deposit growth has been strong, and the growth has been accelerating. As of March 31st, Ally had $115.3 billion in total deposits. That was an increase of 6.8% from the previous quarter and an increase of 16.9% from the previous year. When deposits are growing strong, banks are more willing to cut deposit rates.
For the well-established online banks, Ally Bank has kept its Online Savings Account rates near the middle of the pack for no-minimum online savings accounts. With this rate cut, Ally Bank moves closer to the back of the pack, matching rates with Discover Bank and American Express National Bank. Goldman Sachs Bank USA and Synchrony continue near the front of the pack with 2.25% APY. The newer and smaller online banks continue to lead the well-established online banks with online savings account rates in the 2.25% to 2.50% range.
Ally Bank’s Online Savings Account has no balance tiers, no minimum balance requirements, and no monthly maintenance fee. Even though Ally has rarely been a rate leader for online savings accounts, Ally’s online banking features give it an advantage over other internet banks, especially the new and small ones. An important online banking feature is Ally’s online transfer capabilities. It’s easy to link multiple external accounts for transfers, and Ally allows large transfers to and from external accounts.
Thanks to long-time DA reader buckeye61 for posting on this rate cut in the DA Forum.
No Penalty CD - Good Alternative to Savings Accounts
The savings account rate cut has made Ally’s 11-month No Penalty CD more appealing. The No Penalty CD rates remained the same. Deposits of at least $25k currently earn 2.30% APY. Deposits of at least $5k and up to $25k earn 2.15% APY. Thus, even if you have only $5k in savings, you can benefit from the No Penalty CD.
|2.30*%||$25k||-||Ally Bank||No Penalty 11-Month CD|
|OTHER TIERS: 1.80% → Up to $5k | 2.15% → $5k - $25k|
Besides the higher rate, the No Penalty CD’s rate lock has a big advantage over the savings account when rates are likely to fall. Of course, if you don’t need the liquidity, longer-term CDs should be considered. When today’s No Penalty CD matures in 11 months, rates may be much lower if we are truly heading into a falling rate environment.
11-Month No Penalty CD Issues and Features
Here are some issues and features of the No Penalty CD to consider before applying. These are the same ones that I mentioned last year.
- The No Penalty feature allows you to withdraw all your money, including interest earned, without any penalties, any time after the first 6 days following the date you fund your account. The 6 day exception is due to Federal Regulation D.
- You can only withdraw your full balance early - you cannot make a partial early withdrawal.
- Be careful if you open multiple CDs with funds from your savings account. As DA reader slovokia warned in the Forum, “each withdrawal from your savings account used to fund an Ally CD counts as a transaction against your 6 transaction limit.” If you plan to opening many CDs, you should consider funding the CDs from your Ally Interest Checking account which does not have this withdrawal limitation. If you exceed six electronic withdrawals per statement period in your savings account, Ally charges a $10 fee per transaction over the six transaction limit.
- Ally Bank does not offer an IRA version of this No Penalty CD. All other of its CDs do have IRA versions.
- Using Ally Bank’s online CD management system, you can close a CD without help from a CSR. According to an Ally Bank CSR, “when you make the request online via the Manage CDs link, the account is normally closed and the funds transferred internally immediately.” You can still make the request by phone or secure chat, but that may take “up to 1-2 business days.”
- Another potential concern of any CD is that you’ll lock into a rate right before the CD rate goes up. To relieve these fears, Ally Bank has long had its “Ten Day Best Rate Guarantee.” This guarantee says that if you fund a new CD within 10 days of opening the account, you’ll get the best rate Ally offers for your term and balance tier if Ally’s rate goes up during that time.
- You have 60 days to fund a CD before it closes automatically. Be aware that the rate guarantee only last ten days. If the CD rate drops after 10 days, and you still don’t have the CD funded, you’ll get the new lower rate instead of the rate that was in effect when the CD was opened.
Headquartered in Midvale, Utah, Ally Bank is currently the 16th largest bank in the country, with assets in excess of $162 billion and just over 3.5 million customer accounts. Ally offers its services and product line to individuals 18 years or older, who have a valid Social Security number and a U.S. mailing address.
Applying for an Ally account can be done using Ally Bank’s online application or by calling Ally (877-247-2559). You can fund your new account in a few different ways:
- Transfer from an Ally or non-Ally account
- Check (by mail or Ally eCheck Deposit)
- Wire transfer
Ally Bank (FDIC Certificate # 57803) has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 4.38% (excellent) based on March 31, 2019 data. In the past year, Ally has increased its non-brokered deposits by $14.56 billion, an excellent annual growth rate of 17.55%. Please refer to our financial overview of Ally Bank for more details.
The above rates are accurate as of 6/25/2019.
To review the best savings account rates, both nationwide and state specific, please refer to our Savings Account rates table.