BMO Alto Hikes Rates of Long-Term CDs to Market-Leading Levels

In my September review of BMO Alto, I mentioned its Online CDs were competitive, but not market-leading. After rate increases this week, two of its Online CDs now have market-leading rates. Its 60-month Online CD rate increased 75 bps to 5.25% APY, and its 48-month Online CD rate increased 70 bps to 5.20% APY. It’s the first major bank in this rate cycle to offer direct 4-year and 5-year CD rates over 5%.

For those looking to lock in 5%+ long-term direct CDs before rates start falling, this is your chance. In the last two weeks, new-issue, non-callable brokered 4-year and 5-year CD rates have risen above 5%. Today, the highest 4-year and 5-year new-issue, non-callable CD rate at Fidelity was 5.05% (issued by Wells Fargo). Brokered CDs pay out interest, so if you look at BMO Alto’s Online CD interest rates (5.11% for the 5-year and 5.06% for the 4-year), they are close to the top brokered CD rates. It’s nice to see a bank offer online CD rates that compare favorably with top brokered CD rates. We’ll see if other online banks follow.

BMO Alto’s four shorter-term Online CDs are not as competitive as these two long-term Online CDs, but they’re still competitive, especially when compared to the well-established online banks.

BMO Alto Online CD Details

BMO Alto currently offers six CD terms from six months to 60 months. The Online CDs have no minimum deposit or minimum balance requirements. In addition to Online CDs, BMO Alto offers an online savings account that has maintained competitive rates since it was launched in the summer. The no-minimum Online Savings account can be useful for the funding of a BMO Alto Online CD. It can also be useful for receiving the funds when the CD is closed. Please refer to my September BMO Alto review for more Online Savings account details.

CD Early Withdrawal Penalties and Limitations

First, it’s important to note that BMO Alto has wording in the Online CD Deposit Account Disclosure that gives the Bank the right to refuse an early withdrawal request:

We reserve the right to permit withdrawals of principal only upon maturity. If we permit you to make an early withdrawal of principal before maturity, you will pay an early withdrawal penalty.

If an early withdrawal is allowed, the following early withdrawal penalties (EWP) will be applied:

CD Term - 11 months or less: You will be charged 90 days interest.

CD Term - 12 months or more: You will be charged 180 days interest.

These are mild early withdrawal penalties. The effective yields of the 5-year CD when closed after two, three, or four years are close to the yields of 2-, 3- and 4-year CDs at Ally Bank when those CDs are held to maturity.

A withdrawal early into the term has the potential to eat into the principal:

If the amount of the penalty exceeds the amount of your accrued and unpaid interest, then a reduction of principal would be required in order to pay the penalty.

Further account details are provided in the Deposit Account and Online Banking Agreement. Section V that starts on page 8 details additional terms applicable to all accounts. Paragraph K on page 9 reads, “We can close your Account at any time for any reason.” This could be used to close your CD early, like a callable CD. This type of language is fairly common in bank disclosures, and the risk of the bank making use of this clause is low. It should be noted that this risk exists for any bank. If a bank fails and is closed by regulators, the FDIC or an acquiring bank may choose to close your CD early.

CD Funding and Other Details

The following information is based on the online documentation and a conversation with CSR:

• Funding – ACH or internal transfer
• Interest – Compounded daily/credited monthly, interest can be paid via ACH or internal transfer to a BMO Alto savings account.
• Maturing Funds – ACH, or internal transfer to a BMO Alto savings account. Official check can also be mailed.
• Grace Period – 10 calendar days before automatic renewal. Advance Maturity Instructions can be given to close CD at maturity.

Availability and Account Opening

As an online division of BMO Bank N.A., BMO Alto accounts can only be opened online at the BMO Alto website. Mobile users must also open accounts via the website. BMO Alto doesn’t have an app. Existing BMO Bank customers must create new BMO Alto credentials to open BMO Alto accounts.

BMO Alto accounts are available to U.S. citizens and U.S. resident aliens of age 18 and older. Only individual and joint accounts can be opened. According to the BMO Alto FAQs, “an account can’t be opened by a business, trust, or in a fiduciary capacity.”

Before BMO Alto, BMO Bank N.A. had been offering an online savings account and online CDs to customers who lived outside BMO Bank’s branch footprint. That limitation no longer exists with BMO Alto. People in any state are eligible to open BMO Alto accounts.

Account Opening Details

• Ownership – Individual or joint only
• Beneficiaries – up to 5, equal shares, Social Security numbers required.
• Credit Check – Soft pull by Transunion, ChexSystems

Bank Overview

BMO Alto is a division of BMO Bank N.A. an FDIC member. BMO Bank N.A.is part of the bank holding company, Bank of Montreal. In Canada, the bank operates as BMO Bank of Montreal, a public company that trades on the Toronto Stock Exchange under the symbol, BMO. In the U.S. it does business as BMO Financial Group, a public company that trades on the New York Stock Exchange under the symbol BMO.

As an online division of BMO Bank N.A., BMO Alto operates under BMO Bank’s FDIC Certificate and shares the BMO Bank’s financial history. Deposits made through BMO Alto are not separately insured by the FDIC and count towards your FDIC deposit insurance limit at BMO Bank.

BMO Alto/BMO Bank N.A. has an overall health grade of “A+” at DepositAccounts.com, with a Texas Ratio of 2.95% (excellent) based on June 30, 2023 data. In the past year, BMO Bank’s non-brokered total deposits have increased by $58 billion, an average annual growth rate of 44%. This is rated as an excellent growth rate, but it should be noted that this large increase is due to BMO’s acquisition of Bank of the West in February 2023. BMO has an excellent capitalization level (13.04%), the result of holding $263.34 billion in assets with $34.35 billion in equity. Please refer to our financial overview of BMO Alto/BMO Bank N.A. (FDIC Certificate # 16571) for more details.

In early September 2023, the Bank officially changed its name from BMO Harris Bank N.A. to BMO Bank N.A. In February 2023, BMO completed the acquisition of Bank of the West, which had $92 billion in assets and around 500 West Coast branches. The merger resulted in the 14th largest U.S. bank by assets.

How the 48-Month Online CD Compares

When compared to similar length-of-term CDs tracked by DepositAccounts.com that are available nationwide and have minimum deposit requirements of $10k or less, no banks or credit unions have higher rates than currently offered on the BMO Alto 48-month Online CD. The following table compares the 48-month Online CD to the two highest-rate CDs from credit unions and the two highest-rate CDs from other banks.

How the 60-Month Online CD Compares

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, no banks or credit unions have higher rates than currently offered on the BMO Alto 60-month Online CD. The following table compares the 60-month Online CD to the two highest-rate CDs from credit unions and the two highest-rate CDs from other banks.

The above information and rates are accurate as of 11/7/2023.

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