See the review of the best online savings accounts – updated August 18, 2009.
A brief history of Ally Bank and its parent, GMAC
In the turmoil engulfing General Motors there have been some changes related to banking. 51% of GMAC, which was originally established as a wholly-owned subsidiary of GM to provide financing for automotive purchases, was sold several years ago to private investors. GMAC branched into retail banking, offering savings accounts, certificates of deposit, and money market accounts with an arm of the subsidiary called GMAC Bank. More recently, GMAC became a bank holding company to take advantage of the Troubled Asset Relief Program (TARP), receiving $5 billion from taxpayers through the government.
At the same time, General Motors, which still owns 49% of GMAC, continued to founder towards bankruptcy. In an attempt to distance itself from the GM brand, GMAC Bank rebranded itself as Ally Bank, focused on offering a high-yield interest product, and began actively seeking new customers and depositors.
Click here to see Ally Bank’s current interest rate yield and apply for an account.
Opening an account with Ally Bank
I decided to become an Ally Bank depositor today. Before doing so, I wanted to be confident that my money would be safe amidst General Motors’ impending bankruptcy. Funds deposited with Ally Bank are insured by the FDIC up to the recently raised limits. I won’t come close to exceeding $250,000 in this account. The Treasury recently provided an additional $7.5 billion to GMAC, so Ally Bank’s immediate parent company is well capitalized at the moment.
Here are my experiences from the bank account opening process thus far. As I visited the website to begin my application, Ally Bank warned me that I would need my driver’s license (or an alternate state or military identification number) in addition to my social security number to proceed.
Like some other banks, Ally performs a credit check to verify identity, but they may also reject your application if you are viewed to be a credit risk. The possibility of rejection based on credit history is unusual for banks, but considering this bank is owned by a financing company that has lately become a bank holding company and this type of structure might increase in popularity, requiring credit checks for bank accounts may be part a new reality.
It look less than two seconds once I submitted my application for Ally Bank to inform me my application was approved. Once inside this virtual gate, I was able to choose whether I wanted to receive paper or electronic statements. I always choose electronic to cut down on paper waste, and I wish more services would offer this option from the beginning.
Here’s another great feature. Like ING Direct’s subaccounts, I could create as many separate savings accounts, with their own account names and numbers, as I wanted. At this point in the initial set-up, I could also add money market accounts and certificates of deposit.
I set up two separate savings accounts, both to be funded electronically from my ING Direct Electric Orange checking account. Like setting up linked accounts at any other bank, I will be required to verify two small deposits to ensure I am the owner of the linked account. Options for a one-time initial deposit or a recurring automatic savings plan are available.
Ally Bank then required me to create my security settings for viewing my account information and activity online. The bank has combined most of the security features that have become commonplace over the past few years. I created a user name and a strong password, including mixed case letters and numbers. I selected some secret code words, an image I can expect to see each time I log in, and three security questions and answers. Ally also provides the option for registering the computer you mainly use for accessing the website to avoid repeated security questions at each online session.
If Ally Bank does not recognize the computer you are using to log into your account, they will send you an email with a single-use password to further confirm your identity. I have not seen this feature implemented anywhere else.
Using the Ally Bank savings account
Once logged in, I was impressed with the clean look of the interface. Click on the example below to zoom in.
Ally Bank supports Intuit Quicken and Microsoft Money through Web Connect, which means you can log into the bank’s website and download your activity. At this time, you cannot automatically download your Ally accounts’ activity through Quicken directly (”Direct Connect”). If you like Excel for reconciling your account, Ally offers a flat comma-separated values spreadsheet for download.
Transfers among your Ally accounts, and between your Ally accounts and your linked bank accounts, are free, but keep in mind that savings accounts and money market accounts are limited to six withdrawals per period.
Ally Bank charges no account maintenance fees and there is no minimum balance. If you exceed the six withdrawals mentioned above, Ally will charge a $10 fee. Cashier’s checks and wires carry an additional cost. A returned deposit item, if a check you send bounces or if you don’t have funds in an external account to cover a transfer, will cost $7.50.
The bank is also drawing attention to their 24-hour customer service availability and the plain language used throughout their website. I have not yet worked with Ally’s customer service, but I will be sure to report any future frustrations.
Conclusion
Opening my account with Ally Bank was painless and quick, and I like how the website operates so far. After my initial deposit is transferred, I will have a better idea of how quickly funds are available and can be transferred back to external accounts. I will return with more information at that time.
The main question I have moving forward is how long Ally Bank will be able to maintain their position as one of the highest among high-yield savings accounts. Bank have long used high interest rates to lure new customers only to drop the rates when they become confident in their position as leader, like ING Direct, or when the bank changes ownership, like Washington Mutual.
The American Bankers Association (ABA) sent a letter on May 27, 2009 to the FDIC requesting that Ally Bank be forced to lower their deposit interest rates, citing the bank’s unfair competitive advantage. It is unfortunate that the ABA would take this stance with savers forced to settle for interest rates that will not reach the rate of inflation going forward. The ABA has since removed the letter from the organization’s website.
Like I said above, I am not concerned with risk to the liquidity of my deposit despite Ally Bank’s association with GMAC and General Motors. If the worst happens to General Motors, Ally Bank should remain relatively unaffected.
If you are interested, apply for an Ally Bank savings account here and let me know about your experience by commenting below.
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In personal finance, an additional bailout for a failing company would be similar to throwing good money after bad. For example, if one makes a poor purchasing decision while buying a car, costly repairs might be necessary. Rather than cutting the losses and getting rid of the car, one might continue putting money into the black hole, and after time, the money that you spent on the purchase and repairs could have purchased a nicer car that ran without problems. 
