Ally Bank increased the rates on its 5-year CD and Online Savings Account today. The 5-year CD rate had a large increase. The APY increased by 40 basis points to 2.00%. The savings account rate just increased by 3 basis points to 0.90% APY.
I’m glad to see Ally Bank finally raising its 5-year CD rate. The APY had been 1.60% since October, and the last time it was 2% was in October 2011. With several internet banks offering rates over 2.25%, it was about time for a rate hike.
Ally Bank's CDs and Online Savings Account are also available in an IRA with the same rates.
|2.00*%||$25k||-||Ally Bank||High Yield 5 Year CD|
|OTHER TIERS: 1.90% → Up to $5k | 1.95% → $5k - $25k|
Ally’s savings account rate had been 0.87% since January. It reached its lowest rate in March 2013 when it fell to 0.84%. It started going back up in October. This new 0.90% APY isn’t the best rate compared to other internet banks, but like the new 5-year CD rate, it does keep Ally close to the rate leaders. One interesting thing to note is that Ally’s money market account rate remains at 0.85%. For quite awhile Ally’s savings and money market rates were the same. That changed when Ally increased its savings account rate from 0.85% to 0.87% last January.
It was only about three weeks ago when Ally last increased some of its CD rates (1-year, 18-month and 2-year CDs). It’s nice to see these types of rate hikes at one of the major internet banks. As I mentioned before, we may see more rate hikes like this if it starts to look more likely that the Fed is planning to hike rates in 2015.
Below is the rate history over the last two years of the 5-year CD and Online Savings Account:
Online Savings Account History:
- 0.90% APY 9/05/2014
- 0.87% APY 1/10/2014
- 0.85% APY 11/12/2013
- 0.86% APY 10/25/2013
- 0.84% APY 3/11/2013
- 0.90% APY 1/25/2013
- 0.95% APY 8/31/2012
5-Year CD History:
- 2.00% APY 9/5/2014
- 1.60% APY 10/20/2013
- 1.50% APY 6/10/2013
- 1.51% APY 5/31/2013
- 1.54% APY 4/17/2013
- 1.59% APY 1/9/2013
- 1.61% APY 11/23/2012
- 1.64% APY 11/1/2012
One nice benefit that Ally Bank used to offer is a sizeable renewal rate bonus on CDs (loyalty rewards renewal bonus). However, the size of this bonus has gone down. Readers have reported that that this renewal bonus is only 0.05%. It had been 0.25% for quite awhile.
Even though Ally’s CD rates are not the best, they do have many nice features such as no minimum deposit requirements and below-average early withdrawal penalties. In addition, Ally does a good job at listing important fees, terms and conditions in its "Straight Talk Product Guide". I have more details on these guides in this post.
If you had opened an Ally 5-year CD last year when the rate was 1.60% or less, you may want to consider breaking the CD and reinvesting in a new Ally 5-year CD or a new CD at another bank or credit union. Make sure you consider the early withdrawal penalty. If you had opened the CD before December 7, 2013, the penalty will just be 60 days of interest. After that date, the early withdrawal penalty for the 5-year CD increased to 150 days of interest. You can see if it’s worthwhile to break the CD using our keep-or-break CD calculator.
Ally Bank continues to have strong growth. Over the last year its deposits have grown by more than $5.5 billion (11%) to more than $56 billion. It has assets of more than $100 billion. Its strong deposit growth may be the primary reason we’re not seeing deposit products that are rate leaders. There have been unofficial reports for the last several years that the FDIC has required Ally Bank to keep the rates on deposits low enough so the bank wasn't one of the nation's top five rate payers. Most of Ally Bank’s rates are below the top five so I don’t think this is an important reason for the lackluster rates.
Ally Bank continues to be financially strong with an overall health grade of an A+ with a Texas ratio of 1.30% (excellent) based on June 2014 data. Please refer to our financial overview of Ally Bank for more details. The bank has been a FDIC member since 2004 (FDIC Certificate # 57803).