Ally Bank finally rejoined the 1% club today. Its Online Savings Account rate increased by one basis point to 1.00% APY. The last time Ally’s Online Savings Account rate was at or above 1% was in August 2011. In addition to the savings account rate, Ally also increased the rates of its 18-month CD (9 bps to 1.19% APY) and its 3-year CD (10 bps to 1.50% APY). Both the savings account and the CDs have no minimum deposit requirement. The APY applies to all balances.
|1.60*%||$25k||-||Ally Bank||High Yield 3 Year CD|
|1.35*%||$25k||-||Ally Bank||High Yield 18-Month CD|
Ally Bank’s money market account rate remains at 0.85% APY. The advantage of the money market account over the savings account is that it offers limited check writing and debit card access. For several years, Ally’s money market account used to have the same rates as the savings account. That ended in January 2014 when the savings account rate started to rise above 0.85% while the money market rate held steady.
Credit Freeze and Account Opening
If you still only have an Ally Money Market Account, it makes sense to open the Online Savings Account to take advantage of the higher rate. If you’re already an Ally Bank customer and you’re planning to open a new Ally Bank account, there is something to be aware of. If you are using a credit freeze to protect yourself against identity theft, you will need to lift the credit freeze for a short period of time to enable Ally to confirm your identity. One DA reader who was already an Ally CD customer tried to open a new savings account. According to the reader, Ally required that he lift his credit freeze so they could do a credit check. He was hoping that since he was already an Ally customer, that would not be required. I confirmed with Ally today, that even an existing customer will have to lift a credit freeze for a short period of time before initiating the account application so that Ally can confirm the customer’s identity.
Ally’s Online Savings Account isn’t the most competitive savings account rate. Several internet banks have savings accounts with rates 5 to 10 basis points higher. However, the rate is higher than the savings accounts at other big internet banks like Capital One 360 (0.75%) and Discover Bank (0.95%). This brings up an important question. As Ally Bank grows, will its rates remain competitive?
Ally Bank just recently announced in a press release that "it has surpassed the 1 million mark for retail deposit customers." The press release mentioned the following growth statistic:
As of the end of August 2015, Ally Bank had $52.9 billion in retail deposits, representing an average annual growth rate of approximately 22 percent since 2009.
The FDIC indicates that Ally Bank’s total deposits at the end of June 2015 were $61.8 billion. As a comparison, Discover Bank’s total deposits were $48.4 billion. Before ING DIRECT was acquired by Capital One, its total deposits were $86.8 billion.
Growth isn’t always good for depositors. A bank that grows its deposits too much has less of a reason to keep its deposit rates competitive. A bank like Ally will want to keep a reputation of being competitive with their rates. However, they don’t have a reason to offer the highest rates. If you want the highest rates, don’t expect to stay with any one bank or credit union for multiple years.