Ally Bank's CD Loyalty Rewards Program Changes for 2014

Ally Bank will be changing its CD Loyalty Rewards Program. Effective January 18, 2014, the loyalty reward will be 0.15% instead of 0.25%. The program has been extended to 3/31/2014. I have confirmed this with Ally. Thanks to DA member cumulus for posting on this news in the forum.

For the last several 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. This means that Ally will add 0.25% to the posted interest rate of the CD. When the CD matures, Ally Bank allows customers to renew the CD into a different term. For example, you can change a 3-month CD into a 5-year CD. Also, Ally allows you to add money to the renewed CD.

In March I described my experience with Ally’s CD loyalty rewards program.

One important thing to note about this loyalty rewards program is that there's no guarantee that it will be offered to you. Ally has consistently extended the program, but there's no guarantee that it will continue. Ally can always choose not to offer it.

Ally Bank’s 5-year CDs

This loyalty rewards change and the recent change in the early withdrawal penalty will make Ally’s CDs less attractive. As I reported in October, Ally increased its early withdrawal penalties. These took effect on December 7th. The EWP for the 5-year CD is now 150 days of interest. This is still below average for EWPs on 5-year CDs, but it’s no longer the hot deal of only 60 days of interest. For example, if you opened an Ally 5-year CD today with a 1.60% APY and closed it early one year from now, the effective yield after the penalty would be 0.93%. When the EWP was only 60 days, the effective yield would have been 1.33%. You can see more examples of effective yields of CDs when closed early by using our CD Early Withdrawal Penalty calculator.

Ally Bank’s standard CD rates are currently well below its competitors. For example, EverBank is currently offering a 2.12% APY 5-year CD. That’s 52 bps higher than Ally Bank’s 1.60% APY. EverBank’s CD rate is even low when compared to PenFed’s 3.04% APY. Perhaps with these loyalty reward changes and the larger EWP, Ally will be more generous with its rates in the future.