This morning, Ally Bank increased the rates on all balance tiers of its 11-month No Penalty CD. The $25k tier increased 10 bps to 2.10% APY. Ally Bank also increased the low-tier rates of its 1-Year and 5-Year High Yield CDs to match the $25k tier. All balances now earn 3.00% APY for the 5-year term and 2.50% APY for the 1-year term. The new APYs are shown in bold and are effective as of 9/21/2018. The previous APYs are noted inside parentheses.
11-mo No Penalty CD APYs
$25k+: 2.10% (2.00%)
$5k+: 2.00% (1.90%)
$0+: 1.75% (1.50%)
12-Month High Yield CD APYs
$25k+: 2.50% (2.50%)
$5k+: 2.50% (2.40%)
$0+: 2.50% (2.25%)
5-Year High Yield CD APYs
$25k+: 3.00% (3.00%)
$5k+: 3.00% (2.90%)
$0+: 3.00% (2.75%)
The following table shows all of the new rates and balance tiers for the above CDs. For more CD details, click on the CD row in the table to expand. Please refer to our Ally Bank CD rates table for the full listing of CD and IRA CD rates.
|3.00*%||-||-||Ally Bank||High Yield 5 Year CD|
|2.50*%||-||-||Ally Bank||High Yield 12-Month CD|
|2.10*%||$25k||-||Ally Bank||No Penalty 11-Month CD|
|OTHER TIERS: 1.75% → Up to $5k | 2.00% → $5k - $25k|
The last rate hikes on Ally CDs took place on August 24th when the 1-year, 18-month and 3-year CD rates increased. That was when the top tier rate of the 1-year CD first reached 2.50% APY. The last rate hike on the 11-month and the 5-year terms took place on August 3rd. At that time, the top tier rate of the 11-month CD reached 2.00% APY, and the top tier rate of the 5-year CD reached 3.00% APY.
Thanks to DA reader brskun for posting on the rate increase in the DA Forum.
11-Month No Penalty CD
The 2.10% APY for balances of $25k+ makes this a good deal for those with large balances and who are looking for higher savings account rates at other banks. Instead of opening another savings account at another bank, it’s easier to just open this No Penalty CD. I think that’s the strategy that Ally is using to reduce customers from moving their money. In the last couple of years Ally seems to be using this strategy of offering top rates on its No Penalty CD or its other short-term CDs to discourage customers from moving their money. I like this strategy better than what other banks have been doing (implementing account freezes on new accounts, creating new savings accounts, enforcing small limits on outbound ACH transfers).
For balances between $5k and $25k, the No Penalty CD earns 2.00% APY. For those who fall into this group, it may not be worth the effort to open the No Penalty CD since the current rate of Ally’s Online Savings Account (1.85% APY) is only 15 bps lower. When you consider that the Online Savings Account rate should continue to rise with the expected Fed rate hikes, this No Penalty CD doesn’t look worthwhile if you plan to deposit under $25k. Let’s assume you deposit $10,000. In the very unlikely case in which the savings account rate doesn’t rise, the No Penalty CD will keep a 15-bps rate advantage for the 11 months. That will result in only an extra $13.75 in 11 months.
For those who have less than $5k, the No Penalty CD earns only 1.75% APY. This is clearly inferior to the Online Savings Account. Of course, the Online Savings Account rate may go down in the next 11 months while the No Penalty CD rate is fixed. However, in a rising rate environment, this is a small risk. If you do choose to move your money to a 2.10% savings account at another bank, you won’t be earning much more. For a $5k balance, the difference between a 2.10% APY and a 1.85% APY over one year is only $12.50. You’ll have to decide if it’s worth the effort to move your money.
Those who have existing No Penalty CDs should consider closing their No Penalty CDs and moving that money into new No Penalty CDs. It does take some work, but Ally’s online account management system does make it fairly easy.
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 in June.
- 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.
5-Year and 1-Year High Yield CDs
Ally Bank’s 5-year High Yield CD has finally reached the 3.00% APY milestone for all balances. Also, the 1-year High Yield CD has finally reached the 2.50% APY milestone for all balances. For those with large balances, this doesn’t change things, but for others, this makes Ally competitive to other large internet banks.
One thing that adds to Ally’s competitiveness is its mild early withdrawal penalties (EWPs). Ally’s 5-year CD has an EWP of 150 days of interest. The EWP is 180 days of interest at Capital One and Barclays. It’s 270 days of interest at Goldman Sachs Bank USA. Ally’s 1-year CD has an EWP of 60 days of interest. The EWP is 90 days of interest at TIAA Bank. It’s 181 days at PurePoint Financial, and it’s 270 days at Goldman Sachs Bank USA.
Our pre-filled EWP Calculator demonstrates how Ally’s 5-year CD compares to other top 5-year CDs when the EWPs are considered.
This pre-filled EWP Calculator demonstrates how Ally’s 1-year CD compares to other top 1-year CDs when the EWPs are considered.
A Few Noteworthy Features of Ally High Yield CDs
Ally has the following description of its early withdrawal penalties on its website for CDs purchased or renewed after 12/07/13:
- 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 withdrawal the entire amount.
Few internet 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. The software lets you see the current balance and the post-penalty balance before you make the decision to close the CD early. You have the choice to have the funds from the closed CD transferred online to your account or sent as a check. If it’s transferred to an Ally account, the funds will be available immediately.
FDIC Insurance for Over $250k
Another nice aspect of all of Ally’s accounts is the ability to designate beneficiaries. You can choose up to 10 beneficiaries for each of your non-IRA accounts, and you can choose the designation of either “In Trust For” or “Payable On Death”. Beneficiary designations can be done online in the application or with the 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 also allows customers to open an account in the name of a Trust.
How To Boost Your Ally CD Rate
There is one reason why you may want an Ally 3-month CD (which currently has a rate of 0.75%). There’s an easy way to use these 3-month CDs to get an extra 5 bps on any of Ally’s CDs. DA reader Cumulus describes a useful CD strategy that uses 3-month CDs in this forum post.
Ally Bank’s Online Savings Account
Ally Bank’s Online Savings Account (OSA) rate remained unchanged today. Its last rate hike took place on August 31st when the rate increased 5 bps to 1.85% APY for all balances.
|1.85*%||-||-||Ally Bank||Online Savings Account|
|1.00*%||$25k||-||Ally Bank||Money Market Account|
|OTHER TIERS: 0.90% → Up to $25k|
|0.60*%||$15k||-||Ally Bank||Interest Checking Account|
|OTHER TIERS: 0.10% → Up to $15k|
For more review of Ally Bank’s OSA and its Interest Checking and Money Market Accounts, please refer to my previous blog post.
Headquartered in Midvale, Utah, Ally Bank is currently the 16th largest bank in the country, with assets in excess of $146 billion and just under 3 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 3.55% (excellent) based on June 30, 2018 data. In the past year, Ally has increased its non-brokered deposits by $12.1 billion, an excellent annual growth rate of 16.96%. Please refer to our financial overview of Ally Bank for more details.
How the 11-Month No Penalty CD Compares
There aren’t many No Penalty CDs. The other internet bank that offers this kind of CD is CIT Bank, which also offers an 11-month term. AgFed Credit Union had offered an exceptional No Penalty CD with a 2.40% APY and a 30-month term. Remember, with no-penalty CDs, the longer the term, the better. Unfortunately, this AgFed No Penalty CD ended in July and is no longer available. There is one other easy-membership credit union that has started to offer a no-penalty CD.
The other alternative to these no-penalty CDs is a savings or money market account. We now have five banks offering 2.25% APY. The savings accounts provide more deposit and withdrawal flexibility, but the rate isn’t guaranteed to last unless there’s an intro guarantee period.
The table below compares Ally’s 11-month No Penalty CD with CIT Bank’s 11-month no-penalty CD, Chartway’s 12-month no-penalty CDs and with the two top savings accounts.
|Interest Rate||Account (Minimum balance)||Bank|
|2.25% APY||MySavings Account (no min)||MySavingsDirect|
|2.25% APY||Ascent Money Market Savings - guaranteed to 6/30/19 ($25k min)||Customers Bank|
|2.10% APY||11-Month No Penalty CD ($25k min)||Ally Bank|
|2.05% APY||11-Month No-Penalty CD ($1k min)||CIT Bank|
|2.00% APY||12-Month no penalty CD ($500 min)||Chartway FCU|
The above rates are accurate as of 9/21/2018.