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Ally Bank Announces New Rate Tiers - Will We See Higher Rates?
Ally Bank has notified customers by email and via its Straight Talk blog that it will be implementing new balance tiers on its savings accounts, money market accounts and CDs. The following balance tiers will take effect on November 7th, 2015:
Less than $5,000
$5,000-$24,999.99
$25,000 or more
Currently, only Ally’s Interest Checking account has a rate tier. All other accounts have rates that are not dependent on the balance. Each account has just one rate that’s the same for all balances.
The million-dollar question is if this will be good news for customers with large balances. For example, if your savings account balance is $5K, will you see a rate on November 7th that’s over 1% APY (1% APY is the current savings account rate for all balances). I have not been able to get confirmation of higher rates from Ally Bank. However, a DA reader commented that a CSR "said that although they don't have the new rates available yet, they are adding higher rates for higher balances, NOT lowering rates for lower balances." If that’s the case, this change will be good news for customers who have large balances.
I’m a little worried that rates for balances under $5K may eventually become disappointing. My opinion is based on Ally’s Interest Checking account which currently has a $15K balance tier. The current rate for balances under $15K is only 0.10%. The rate for balances of $15K+ is 0.60%. Compared to many other internet checking accounts, Ally’s bottom-tier rate is low.
We’ll have to wait for November 7th to see what the new rates look like, but don’t get too excited if only higher rates are introduced. If the bottom-tier rates remain the same as the current rates, that doesn’t mean they will stay competitive. If we finally see a rising rate environment, these bottom-tier rates may lag.
Even if the bottom-tier rates lag, that may help those with large balances. This change may allow Ally to be a rate leader for the $25K balance tier.
The change will be simple for the savings and money market accounts. However, it’s a little complicated for CDs. Ally Bank included the following chart in the email describing how this change will affect the different accounts:
It’s important to note that this change won’t affect any existing CDs except for the Raise Your Rate CDs. For those cases, the change can only help in that Raise Your Rate CD customers will have the opportunity to increase their rate if the rate Ally offers for the customer’s term and tier goes up.
If the rate tier for $5K+ and $25k+ are big enough, I can see myself combining my many smaller CD's into one larger CD. Likewise for combining my Ally savings accounts.
I gave up on Ally after their horrible web site update earlier in the year. I figured it was a harbinger of things to come. Luckily all of my CD's have matured since then and I've closed down pretty much all my accounts. At one point I had close to 30 accounts with Checking, Savings, IRA's and CD's, now I'm down to just 1 checking and 1 savings, with less then $10 between them.
We'll see what November 7th brings, but I doubt it will be very good for savers.
That bug doesnt extend to billpay.
I guess i should complain.
Bigger doesnt mean better for customers. It just means they think we are "sticky".
I dont know what it costs them for me to have a checking account with an average balance of under $50.
Id be very surprised if this really means a new higher rate for large balances in the savings & money markets.
Guess we will wind up with something like this.
You earn… On your balance of:
$1 – $2,000 3.00% APY
$2,000.01 – $5,000 2.00% APY
$5,000.01 – $10,000 1.00% APY
$10,000.01 – $50,000 0.50% APY
$50,000.01 – $100,000 0.25% APY
$100,000.01 – $9,999,999 0.20% APY Each tier of your total balance adds up to a blended Annual Percentage Yield (APY). For example:
Ally offers deposit accounts to generate funds to make car loans (at 2-3% for a short term loan). Small accounts are expensive to service relative to the funds they provide--Ally probably loses money on them. I think Ally will try to stay competitive (maybe even market leading) for large deposits, and may be happy to shed some smaller customers.