As featured in The Wall Street Journal, Money Magazine, and more!
     

Ally Bank No Penalty CD

This article was written by in Banking. 12 comments.


Certificates of deposit often offer higher interest rates than savings accounts and money market accounts because the banks expect customers to keep their money locked away in CDs for a predetermined period of time. Most banks discourage withdrawals from CDs by charging a penalty for any withdrawal before maturity.

The penalty usually takes the form of a certain portion of interest that the customer would have been earned. A number of banks have begun improving their certificates of deposit by offering “no penalty” options. Ally Bank is offering an 11-month no penalty CD.

Unlike Ally Bank‘s other CD offerings, which charge a penalty of 60 days’ interest if you withdraw any portion of your deposit before the maturity date, you can withdraw your entire balance in the no penalty CD at any time starting six days after you open the account. You cannot, however, withdraw a portion of your balance; you must remove all the funds in the CD in order to qualify for the penalty-free benefit.

One thing to keep in mind before you open a CD is the likelihood of interest rates increasing before maturity. Unless you’re experimenting with Ally’s “Raise Your Rate” CD, you lock in the current interest rate when you open the account. If interest rates increase around you, you will not be able to take advantage of the higher rates unless you close the account and open a new one — a free option with the no penalty CD.

Rates are at all-time lows, and they have no place to go but up. The only question is the timing.

For more of my thoughts on Ally Bank, read my review. Consumerism Commentary is an authorized affiliate of Ally Bank.

Updated December 11, 2012 and originally published April 30, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

Email Email Print Print
avatar
Points: ♦127,500
Rank: Platinum
About the author

Luke Landes is the founder of Consumerism Commentary. He has been blogging and writing for the internet since 1995 and has been building online communities since 1991. Find out more about Luke Landes and follow him on Twitter. View all articles by .

{ 5 comments… read them below or add one }

avatar SavingEverthing

in a 11-month period, are interest rates going to raise significantly to make it worth to lock at such a paltry 1.35%apy? There are several online savings bank accounts that pay more than this, and has greater liquidity power than an ally cd.

Reply to this comment

avatar Luke Landes ♦127,500 (Platinum)

This could be a bad time for CDs.

Reply to this comment

avatar Michael

I think that’s the beauty of this CD

If you are correct, and interest rates do rise considerably in the next 8-12 months, then you can simply pull your money out, without penalty.

1.35% is hard to find from an online savings account these days. Only a few offer that kind of percentage, and some require a minimum deposit.

Reply to this comment

avatar Ryan Finnie

I signed up for an Ally No Penalty CD last summer. At the time, it was a 9 month term, but now it’s 11 months. After a rocky start that was eventually resolved to my satisfaction (google “site:finnie.org ally bank” for the incident), they’ve been pretty awesome. When the No Penalty CD came to term, they offered a 0.25% bonus for renewing. I called them and asked if it could be applied to a different CD, and they said it could, so I pushed the principal and interest into a 2-year Raise Your Rate CD (was 2.29% after the bonus). I even opened another No Penalty CD a few weeks ago. So yeah, I’m happy.

Reply to this comment

avatar Jim

Even better than the no-penalty CD’s are the 60 month CD’s with 60 day interest penalty on early withdrawl. Open a 60 month CD and if you hold it 3-6 months (depending on rates when you open it), you’d break even on just about any rate that the 11-month CD would go up to.

For example (as of 5/1), raise your rate CD is at 1.99% APY, 60 month CD is at 2.99%APY. At those rates, if you withdraw from the 60month at 1 year, you earn APY of 2.49% after the penalty (a half percent better 1 year rate). The longer you hold the 60 month, the more the earned interest pulls away from whatever you’d get with the raise your rate CD. And hey, if the rate goes up too much, then just drop the 60 month and as long as you’ve had it for about 6 months you’d break even with having held the raise your rate CD.

Reply to this comment

Leave a Comment

Connect with Facebook

Note: Use your name or a unique handle, not the name of a website or business. No deep links or business URLs are allowed. Spam, including promotional linking to a company website, will be deleted. By submitting your comment you are agreeing to these terms and conditions.

Notify me of followup comments via e-mail. You can also subscribe without commenting.

Previous post:

Next post: