Ally Bank Increases Rates of Online Savings Account and Seven CDs

Just 17 days after the last rate hike, Ally Bank increased the rate again of its Online Savings account. This time, it’s a 15-bp rate hike, which increased the rate from 0.60% to 0.75%. Before May 10th, the Ally Online Savings account rate was stuck at its bottom of 0.50% 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. Also, this new 0.75% rate is still lower than Ally’s pre-2020 rate bottom (0.84% in 2012 and 2013.) There is still a long way to go before we reach more normal 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 seven CDs were also increased. 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 5/27/2022. 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, cumulus, who posted news of these rate increases in the DA Forum.

Deciding Between the Ally Online Savings Account and Ally CDs

If you have any existing No Penalty CDs, it makes sense to close them and transfer the funds into your Ally Online Savings Account where it will earn a higher interest rate. Ally makes it easy to close CDs and move the funds to your existing Ally liquid account. The transfer of funds is immediate, so you don’t have to worry about losing interest while the funds are in transit. Once in the Online Savings Account, you can decide if new Ally CDs make sense. One easy option is a new Ally 11-month No Penalty CD that currently has a rate 10 bps above the Online Savings Account rate. Another option that may take more review is one of Ally Bank’s other CDs. The three most competitive Ally CDs now are its 14-month Select CD (1.65% APY), its 20-month Select CD (2.00% APY) and its 36-month High Yield CD (2.25% APY).

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 and the EWP of the 36-month CD is 90 days of interest. I populated our CD EWP Calculator with these three CDs so you can see the effective yields when these CDs are closed early. Starting six months after opening, the 36-month High Yield CD will offer a higher effective yield than the 14-month Select CD. The advantage of the 36-month CD increases after six months. Even when the 14-month Select CD matures, the 36-month High Yield CD that’s closed early at 14 months will have an effective yield (1.77% APY) that’s higher than the yield of the 14-month Select CD that’s held until maturity (1.65% APY).

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 5/28/2022:

• 2.00% 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 5/28/2022:

• 1.65% 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 has a higher rate than the rate offered on the Ally Bank Select 20-month CD,. The following table compares the Ally Bank 20-month Select CD to the three highest-rate CDs from other banks and the two highest-rate CDs from credit unions.

The above information and rates are accurate as of 5/28/2022.

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