Ally Bank Increases Rates of Online Savings Account and Five CDs

On Friday, Ally Bank increased the rate of its Online Savings account for the second time this month. The 10-bp rate hike increased the APY from 0.90% to 1.00%. For June, the APY has increased 25 bps. This follows 25 bps of rate increases in May. Before May 10th, the Ally Online Savings account rate was stuck at its bottom of 0.50% that had lasted since December 2020. The rate hikes are nice to see, but it should be noted that other online banks have been faster in raising their online savings account rates.

Ally Bank’s Money Market also had the same rate increase. Since December 2020, Ally Bank has kept the rates of the Money Market and the Online Savings the same. Before that time, the Online Savings had higher rates, with the largest difference occurring in 2018 and 2019 when the Online Savings reached 2.20% APY while the Money Market never exceeded 1.00% APY. The primary difference in features between the two accounts is that the Money Market includes debit cards and paper checks. Neither is available for the Online Savings.

Ally Bank, like most online banks, continues to focus more on CD rate hikes than savings and money market rate hikes. Rates of five CDs were also increased on Friday. The APYs of these CDs along with the savings and money market accounts are listed below. The new APYs are shown in bold and are effective as of 6/27/2022. The previous APYs are noted inside parentheses.

There is no minimum deposit to open a CD. Ally used to have tiered rates, with higher rates for larger balances, but currently, none of its CDs have balance tiers. Ally’s CDs (with the exception of the No Penalty CD) are also available as an IRA (Traditional and Roth) earning the same APYs, with the same funding requirements. The following table provides the current yields of the above CDs that had rate increases. Click on the “details” arrow to display the CD rate history and other details. For the full list of Ally Bank deposit rates, please refer to the rates section of our Ally Bank page.

Thanks to DA reader, RichardW, who posted news of these rate increases in the DA Forum.

Deciding Between Ally CDs

One thing to consider is Ally Bank’s mild early withdrawal penalties. The EWP of the 14-month and 20-month CDs is 60 days of interest, the EWP of the 36-month CD is 90 days of interest, and the EWP of the 60-month CD is 150 days of interest. I populated our CD EWP Calculator with these four CDs so you can see the effective yields when these CDs are closed early.

There is no reason to choose the 14-month CD over the 20-month CD. If you close the 20-month CD early at 14 months, the effective yield will be higher than the 14-month CD held to maturity. Both have the same EWP. Thus, the effective yields are the same for closures before 14 months.

When comparing the 36-month and the 60-month CDs, the 60-month CD has a higher effective yield if closed at 36 months than the 36-month CD held to maturity. The 36-month CD has an advantage for some early closures due to its smaller EWP. If closed before 14 months, the 36-month CD will have a higher effective yield than the 60-month CD.

The only reason to choose the 60-month over the 20-month would be to benefit from the longer term. The yield of the 20-month held to maturity exceeds the 60-month closed at 20 months. Due to the smaller EWP, the effective yield of the 20-month closed early exceeds that of the 60-month.

Ally Bank continues to offer a 0.05% loyalty reward when you renew your CDs. There’s an easy way to use this loyalty reward to get an extra 5 bps on all of your Ally CDs.

Ally Bank Select CD Features

Below are the details of this 20-month Select CD that are listed in this Ally 20-month Select CD promotional page as of 6/27/2022:

• 2.35% APY
• 20-month term
• Promotional term available through 7/31/2022
• No minimum deposit to open.
• Automatically renews into a 18-month High Yield CD

There’s also a 14-month Select CD, with details listed in this Ally 14-month Select CD promotional page as of 6/27/2022:

• 2.00% APY
• 14-month term
• Promotional term available through 6/28/2022
• No minimum deposit to open.
• Automatically renews into a 12-month High Yield CD

Ally Bank’s Early Withdrawal Penalty and Early Withdrawal Process

Ally rarely has the highest CD rates, but it has two significant advantages: 1) mild early withdrawal penalties, and 2) an easy and quick process to request an early closure and to receive the funds.

Ally has the following description of its early withdrawal penalties on its website for its CDs:

• 24 months or less: 60 days of interest
• 25 months – 36 months: 90 days of interest
• 37 months – 48 months: 120 days of interest
• 49 months or longer: 150 days of interest

One downside with Ally’s CDs is that they don’t allow partial early withdrawals. If you need some of your CD principal before maturity, your only option is to close the CD and withdraw the entire amount.

There was a long period of time when Ally disabled the capability to request online an early closure of a CD. It instructed the customer to call to request an early closure. I’m happy to report that the online CD closure capability is back at Ally. When you log in, go to the “Early Withdrawal” section of “Manage CDs”. At this page, you can see your CD’s current balance that includes accrued interest. It also displays the “after penalty” balance. This allows you to confirm exactly how much interest you will lose before you request an early closure. To receive the funds, it offers two choices: 1) online transfer, or 2) check. If you choose “online transfer”, you can select the destination account. Any of your Ally liquid accounts are options. Also, any of your external linked accounts are also options. If you choose an Ally account, it informs you that “Transfers to Ally Bank accounts should post immediately.” If you choose an external linked account, it informs you that “Transfers to non-Ally Bank accounts usually take 3 business days.”

Other Ally Bank CD Features

Few online banks offer the features that Ally offers for online CD management. When you log into your account, you can change things like how interest is disbursed. Ally allows you to have the interest paid monthly, quarterly, semi-annually or annually. You can also change how interest is paid. You can choose for the interest to be credited back to the CD, paid out to your account or paid as a check. The software can also be used to change renewal options and to request an early withdrawal.

Beneficiary Designations and Extending FDIC Insurance

Another nice aspect of all of Ally’s accounts is the ability to designate beneficiaries. You can choose up to ten beneficiaries for each of your non-IRA accounts, and you can choose the designation of either “In Trust For” or “Payable On Death”. Beneficiaries can be individuals or non-profits/charities. You can also specify how to distribute the funds (either equally among beneficiaries or by specific percentages.)

Beneficiary designations can be done online in account management software after the account has been opened. These features make it easy to maintain FDIC insurance on deposits in excess of $1 million. I described how this can be done in this blog post.

Ally now requires that you provide beneficiary identification. According to Ally, the FDIC added regulatory requirements for recordkeeping which required Ally to maintain “complete and accurate beneficiary information.” The beneficiary’s Social Security number or Tax ID isn’t the only option. Other options listed by Ally include Alien Identification Card, Driver’s License, Valid Passport and Military ID.

Ally also allows customers to open an account in the name of a Trust.

Availability

Headquartered in Sandy, Utah, Ally Bank offers its services and product line to individuals 18 years or older, who have a valid Social Security number or Tax ID and a U.S. residential street address.

In the online application, Ally asks “have you placed a security freeze on your credit?” According to Ally:

If you have a freeze on your credit as a feature of credit security monitoring, you'll need to request a "federal lift" before you submit your application. Once your application is processed you can re-instate the freeze. If you are already an Ally Bank customer, you can complete the application, and we'll contact you to verify your identity.

We'll use your credit information to verify your identity, protect you from identity fraud and comply with federal regulations. Your credit score won't be affected.

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

Bank Overview

Ally Bank (FDIC Certificate # 57803) has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 7.14% (excellent) based on March 31, 2022 data. In the past year, Ally has increased its non-brokered deposits by $10.28 billion, an excellent annual growth rate of 7.86%. Please refer to our financial overview of Ally Bank for more details.

Ally Bank has a long history as an online-only bank. The name used to be GMAC Bank. The name change to Ally Bank was completed in late 2009. My first posts on GMAC Bank was in early 2006. Back then it only offered money market accounts and CDs. The Online Savings account was launched in 2008, and the Interest Checking account was launched in 2010.

How the 20-Month Select CD Compares

The 20-Month Select CD continues to be Ally Bank’s most competitive product. Thus, I’ll limit comparisons to this CD. When compared to similar length-of-term CDs tracked by DepositAccounts.com that are available nationally and have minimum deposit requirements of $10k or less, only one bank and one credit union have a higher rate than the rate offered on the Ally Bank Select 20-month CD. The following table compares the 20-month Select CD to the two highest-rate CDs from other banks, the two highest-rate CDs from other major online banks and the two highest-rate CDs from credit unions.

To look for the best CD rates, both nationwide and state specific, please refer to our CD Rates Table page.

How the Ally Online Savings Account Compares

When compared to nationally available Money Market Accounts and Savings Accounts tracked by DepositAccounts.com, that do not require large balances or direct deposit, and do not have small balance caps, the Ally Online Savings APY ranks well below the rate leaders. The following table compares the Ally Online Savings APY to the two highest-rate savings accounts from other banks and the two highest-rate savings accounts from other major online banks.

To look for the best rates on liquid bank accounts, both nationwide and state specific, please refer to our Money Market Accounts Table and Savings Accounts Table.

The above information and rates are accurate as of 6/27/2022.