UPDATE 1/4/17: The No Penalty CD APY has fallen from 1.25% to 0.87%.
This might be a sign that Wednesday’s Fed rate hike will have an effect on deposit rates. Ally Bank just raised the APY of its 11-month No Penalty CD by 38 basis points to 1.25%. This is the highest APY that Ally Bank has offered on this CD since 2010.
The 1.25% APY applies to all balances. Ally Bank added rate tiers in 2015, but this 11-month CD currently has just one rate for all tiers.
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.
Please note that Ally does not offer an IRA version of this No Penalty CD. Ally Bank does offer IRA versions of its High Yield CDs and its Raise Your Rate CDs.
No Penalty CD vs. Savings Accounts and Shorter-Term CDs
Before this rate increase, there wasn’t any compelling reason to apply for the No Penalty CD since Ally savings account rate was higher than the No Penalty CD rate. Now, savers have to decide if there’s any reason to keep sizable amount of money in a savings account rather than the No Penalty CD. Of course, money that you have immediate plans for will still make sense to be in the savings or checking account. However, if you don’t have any immediate plans for the money (either for spending or for investing in long-term CDs or elsewhere), it’s hard not to like this No Penalty CD.
If your savings account doesn’t have a rate as high as this No Penalty CD, why not choose this CD? The same point can be made with CDs with terms under 11 months. Unless that CD has a rate higher than this No Penalty CD, there’s no reason to choose that CD over this No Penalty CD. You can make this No Penalty CD into any term you want from 7 days to 11 months.
Potential Concerns of the No Penalty CD?
Besides losing access to the money for the first six days of account funding, there may be the concern of not having immediate access to the money after the first six days. In 2011, I tested closing the No Penalty CD. Back then you had to either call or use the online secure chat to request a CD closure. Using that process, it took about 48 hours from the time of the closure request to the time the funds became available in my Ally savings account. One thing that has changed is that Ally Bank now has an CD management system that allows customers to manage their CDs when they’re logged into their online account. Using that CD management system, you can now close the 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 will 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.
Headquartered in Midvale, Utah, Ally Bank is currently the 23rd largest bank in the country, with assets in excess of $114 billion and over 2.2 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 the 11-month No Penalty CD 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 1.51% (excellent) based on September 30, 2016 data. In the past year, Ally has increased its deposits by $10.38 billion, an excellent annual growth rate of 16.23%. Please refer to our financial overview of Ally Bank for more details.
How the CD Compares
As I described above, it’s not really fair to compare the No Penalty CD to other standard CDs. For simplicity, let’s compare it to standard 12-month CDs that are nationally available from other banks and credit unions. When compared to 206 12-month CDs tracked by DepositAccounts.com, only eight 12-month CDs have higher rates. A sample of these are shown below:
|Interest Rate||CD Length of Term||Credit Union/Bank|
|1.36% APY||1 Year Money Market Certificate ($1k min)||PenFed Credit Union|
|1.31% APY||1-Year eCD ($10k min)||VirtualBank|
|1.25% APY||11-month No Penalty CD (no min)||Ally Bank|
Please note the early withdrawal penalties (EWP) of 1-year CDs from PenFed and VirtualBank. For PenFed, the EWP is “30% of what would have been earned if the certificate had been held to maturity, not to exceed total dividends earned.” For VirtualBank, the EWP is 3 months of interest.
The above rates are accurate as of 12/16/2016.