Ally Bank Increases Its Savings & Money Market Account Rate
Late this morning, another internet bank increased its savings account rates. Ally Bank increased the rate of its savings and money market accounts from 0.89% to 0.95% APY (Hat tip to the readers who mentioned this news in the discussion forum and in the comments.) This is the highest rate for Ally's savings and money market accounts since October 2011.
Ally Bank has kept the rates of the money market and the savings account the same since December 2009. If you're deciding which one to open, the money market account, unlike the savings account, offers limited check writing and a debit card. Everything else is the same. Both have no monthly service charges and no minimum balance requirements. I have more details in my Ally Bank savings and money market comparison.
This Ally rate hike came soon after Sallie Mae Bank raised its money market yield from 0.90% to 1.00% APY. We have seen several other internet banks hike rates in the last few months. With news that more Fed action to further drive down interest rates is likely, it's nice to see these rate hikes. As I said in the previous post, competition must be the primary reason we're seeing these rate hikes, and hopefully, this will continue to put pressure on the internet banks to keep their rates competitive.
Ally Bank CD Rate Cuts
Unfortunately, not all of Ally Bank rates went up today. Its 5-year CD yield fell from 1.74% to 1.72% APY. The 4-year Raise Your Rate CD yield fell from 1.49% to 1.44% APY.
With internet savings account rates rising and CD rates falling, long-term CDs are looking less appealing. If you have CDs maturing, will you roll over that money into new CDs? Or will you move your money into these savings and money market accounts?
If you think rates will continue to fall like they have in the last few years, moving more money into your savings accounts, may not be the best choice. On the other hand, with CD rates so low, you can't lose much by keeping that money liquid.
That's what Bernanke and the Pres want us to do!
I am thinking of moving out of Capital One Direct Banking. Yield is no longer competitive.