Tips on Opening an Ally Bank Certificate of Deposit
News of Ally Bank's small early withdrawal penalty may be spreading. Ally continues to cut rates which gives me the impression they're seeing strong demand. The 5-year CD yield is now under 3% (2.99% APY) as of 4/3/2010.
Even though you can get better rates on a 5-year CD at other banks, Ally Bank's small early withdrawal penalty still makes the Ally CD a deal. There have been concerns about the possibility that Ally could increase the penalty on an existing CD. As I described in this post, I've received assurances from Ally's Public Relations Director that Ally would honor the terms of the CD until maturity which is what we should expect from any bank or credit union. I was told that Ally CSRs are being trained on this issue, and you should be able to get your own assurance directly from Ally's CSRs.
So if you decide on opening an Ally CD, here are some CD features and tips:
- Ally Bank does not allow partial withdrawals of the CD. A withdrawal of any amount of the principal will cause the closure of the entire CD.
- Because of the above feature, it makes sense to open multiple small CDs rather than one big CD.
- One potential issue with opening multiple CDs is that it could trigger a fee if you use a savings or money market account to fund the CDs. The withdrawal for each CD would be counted towards the 6-per-month withdrawal limit for all savings and money market accounts. This is true for Ally and all other banks. If you plan to open several CDs, you may want to consider opening Ally's checking account, and using the checking account to fund the CDs. Note, opening the checking account would likely not be useful if you want to immediately open the CDs.
- When you close an Ally Bank CD, you have to contact an Ally CD who can submit the closure request. This can be done by phone or secure email while logged into your account. According to the CSR, it'll take 3-5 business days to see the funds in your external account if you choose an ACH transfer. A check that's mailed will take about 5-7 business days from the request. The best option is if you have an Ally savings or money market account. In that case it'll take only 1 business day according to the CSR. The above info is based on what I received from an Ally CSR in January
For more details about Ally Bank and this early withdrawal penalty, please refer to the post Huge Change to Ally Bank CDs Will Benefit Savers. To see more of my Ally Bank posts, please refer to the Ally Bank blog posts page.
Ally's Deposit Agreement allows it to change the early withdrawal penalty at any time upon written notice. It is perfectly legal under the FDIC regulations to do so
This might be the case if you transfer the funds online, but there is a better way: I recently opened several Ally CDs and did not have this problem. I transferred the funding money to my online savings account and then called a CSR to have the money moved into the previously opened CDs. Ally's back office made a single large withdrawal from my online savings and disbursed it into the CDs. Result: 1 withdrawal, not several.