Ally Bank increased the rate of its Online Savings Account today by 5 basis points to 0.95%. Ally Bank also raised the rates of two of its CDs by 5 basis points. Its 1-year CD rate increased to 1.05% APY, and its 2-year Raise Your Rate CD rate increased to 1.25% APY. The same rate increases also took effect on the IRA versions of the savings account and CDs. Thanks to DA members Larkin and OldGuy for posting on this news in the DA forum.
Ally’s savings account rate is inching toward 1%. Hopefully, Ally will be in the 1% club before too long. The 1% club has been growing, and perhaps that competition spurred Ally Bank to make this change. The last savings account rate hike at Ally was in September when the rate increased from 0.87% to 0.90%. I have more of the rate history of this account in my September Ally Bank post.
Unfortunately, Ally’s money market account rate remained the same 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 does make sense that the savings account would have a higher rate. Unlike the savings account, the money market account has limited checking writing privileges with free checks. That has some extra expenses for Ally.
Now that the savings account rate is 10 basis points above the money market rate, those who just have an Ally money market account may want to consider opening the savings account and moving most of the liquid money into that account.
Time To Raise the Rate of Your Raise Your Rate CD?
Like the new savings account rate, the new 1-year and 2-year CDs aren’t rate leaders. There are several internet banks with higher rates. The 2-year CD is a Raise Your Rate CD. That does offer the customer the opportunity to bump up the rate once during the term. Those who already have this 2-year Raise Your Rate CD should consider increasing the rate to 1.25% APY. The rate of this CD had been as low as 1.00% APY back in September of 2013. If you had opened that CD at that time with a $100,000 balance, you’ll earn almost $190 more by bumping up today to the new rate. Of course that eliminates the opportunity for a future bump-up if rates continue to increase. However, even if the rate does increase, there may not be enough time before maturity in which the higher rate offsets the reduced time. As you can see, the Raise Your Rate feature doesn’t offer a big benefit. If a saver was going to invest in a 2-year CD back in September 2013, that saver would have been better off with Salem Five Direct which was offering a conventional 2-year CD with a 1.25% APY.
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.
Ally Bank continues to have strong growth. Over the last year its deposits have grown by 4.4 billion (8.39%) to $56.8 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 1.37% (excellent) based on September 30, 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).