Ally Bank Cuts CD Rates - Will Other Banks Follow?
It was only a matter of time after months of declines in Treasury yields and brokered CD rates that internet banks would follow with rate cuts on their online CDs. Earlier in the week, Barclays made cuts on its CD rates, and today, Ally Bank cut rates on several of its CDs.
The rates on Ally Bank’s three longer-term High Yield CDs (18-month, 3-year and 5-year) and its two Raise Your Rate CDs (2-year and 4-year) declined 10 bps. The same rate cuts also took effect to the IRA version of these CDs.
The rate cuts on the Raise Your Rate CDs are especially disappointing. The 4-year Raise Your Rate CD has a history of rates that have been well below the standard 4-year CD rates of other internet banks. With the Raise Your Rate CD rates now falling, there is even less reason to choose these.
The rates of the shorter-term CDs and the liquid accounts remained the same. That includes the special 15-month Select CD (2.80% APY). I was told that this 15-month Select CD rate was scheduled to last until May 31st. I wish we could get similar guarantees on the long-term CDs. If the Fed has to start cutting rates, many savers may regret missing out on today’s long-term CDs.
A Few Noteworthy Features of Ally CDs
For more details on Ally Bank’s 15-month Select CD, please refer to my previous Ally blog post.
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”. No social security number is required. 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 January 17th when the rate increased 20 bps to 2.20% APY for all balances.
For more review of Ally Bank’s OSA and its Interest Checking and Money Market Accounts, please refer to my previous blog post.
Availability
Headquartered in Midvale, Utah, Ally Bank is currently the 16th largest bank in the country, with assets in excess of $159 billion and just over 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
Bank Overview
Ally Bank (FDIC Certificate # 57803) has an overall health grade of "A" at DepositAccounts.com, with a Texas Ratio of 4.74% (excellent) based on December 31, 2018 data. In the past year, Ally has increased its non-brokered deposits by $11.44 billion, an excellent annual growth rate of 14.37%. Please refer to our financial overview of Ally Bank for more details.
The above rates are accurate as of 3/29/2019.
To review the best CD rates, both nationwide and state specific, please refer to our CD rates table.
CD game for an extended term. Missed out on the various 4% offers of months passed because of PenFed & Keesler commitments, but now set with Inova (3.80%), US Senate (3.69%) & Mountain America (3.51%) for 5 years running. Ally and the rest of only academic interest through the next recession, - I'm going fishing. Good luck to all.
I'm flush with large amounts of savings and emergency funds. Retired, fairly comfortable, but thinking I better move some of that into a 5 year cd, somewhere, and pronto.
But realistically am unable now to conjure how they will be able to make it happen.
Ever since their great $1000 promotion last fall, ending in January, it has been:
Ally Bank: PU
First some perspective, on a $100,000 deposit, the difference between 3% and 3.5% is $500 a year. I'm not diminishing the value of $500. But over the course of a year is it really going to make any significant difference in your lifestyle?
Next the bigger perspective. If current economic policy is the correct way to grow the economy, then increasing interest rates would be a drag on that growth. To the extent that the FED does not support increasing rates, it helps mitigate that drag. Remember that the nominal return that you get on your bank deposits is only part of the story. There are all kinds of benefits that you get from a growing economy and low inflation that increase your real return. Those benefits may well more than offset the lower interest rate.
I'm not suggesting it's better to get a lower interest rate on your deposit. It's always best to get the best deal you can. I'm merely pointing out that the lower interest rates have other implications which may, under the right conditions, more than compensate you for the difference in the rates.
With respect to the real estate taxes I think Ronald Reagan said it best in his many quotes on the topic of taxes... One of them being “The American people are not undertaxed, the government in Washington is overfed.”
Unfortunately this applies equally well to state and local governments from whom you receive your property tax bills.
It's an immutable law of all government. Government is always inefficient, wasteful and corrupt. The only way to minimize these negatives is to minimize the size and scope of government, a task that becomes increasingly difficult as the larger and more powerful it gets the more it resists constraint.
In any event it's great to have a website like this, that ties together political and economic views and bundles them into a practical and useful tool to help people maximize their interest bearing investments.