Ally Bank's Loyalty Rewards Program for CD Renewals

For the last few years Ally Bank has been offering a loyalty rewards program to its CD customers when the CDs mature. This is intended to encourage customers to renew their CDs at Ally rather than moving the money to another bank. The current reward is a 0.25% rate bump. DA reader cumulus has a useful thread with information on this program that he learned from Ally. He reported that the current loyalty rewards program ends June 30, 2012, but in the last few years it has been common for Ally to renew the program every 3 or 4 months.

I've been hesitant in discussing this program since it's not documented by Ally, and it would be easy for Ally to change the rules and who is offered the loyalty reward. So if you open an Ally CD in hopes that you'll be offered a loyalty reward when it matures, you might be disappointed. I've decided that a post describing this program could still be useful since the program does have a long history. Just be aware there is no guarantee that you'll be offered the loyalty reward when your Ally CD matures.

Here are the details I received today from an Ally CSR regarding the loyalty program:

Beginning on the day of maturity, you have a 10 day grace period during which you can make changes to your CD. During your 10 day grace period you have the option of adding or removing funds, or even changing the term to take advantage of a higher rate. Regardless of what changes you make, if any part of your CD is left on deposit, we'll add the loyalty reward.

It's nice to see that the loyalty reward program allows customers to change CD terms and to add to the CD. With CD terms as short as 3 months and without CD minimum deposit requirements, it would seem like these features could be useful in getting a higher rate on the 5-year CD. However, as I mentioned above, there's no guarantee that you'll be offered the loyalty rewards, and the chance may go down if customers game the system.

Another thing to consider about this loyalty reward program is that it's another way Ally can attract more deposits. Back in 2009 the Wall Street Journal reported that FDIC asked Ally officials to keep the rates on deposits low enough so the bank wasn't one of the nation's top five rate payers, as measured by Bankrate.com. This came after the American Bankers Association complained to the FDIC about Ally's deposit rates. The ABA thought it was risky for Ally to be allowed to pay above-market rates since Ally was receiving government assistance.

I haven't carefully tracked Ally CD rates since 2009, but it does appear that Ally's rates have remained below the rate caps as described above. Thus, this loyalty rewards program may be a way for Ally to attract more deposits without raising a red flag for the FDIC. That may also be why Ally has such a small CD early withdrawal penalty. If these features are part of Ally's strategy to get around these rate restrictions, I'm happy to see it. The government is already punishing savers like never before. We need all the help we can get.