Ally Bank 5-Year CD Rate (Drop) History

As part keeping the interest rate on my emergency fund as high as possible, I’ve shared my like of rewards checking, savings bonds, and the Ally Bank 5-Year CD. Ally CDs have a small 60-day interest withdrawal penalty, so the liquidity is still quite good. As long as you hold it for 6 months, you’ll be earning more interest than the highest rate from an online savings account even after the penalty is factored in. After that, the effective rate just keeps getting better until you reach maturity at the full rate.

With no minimum balance requirements, you can also buy them in whatever size chunks you want. And I have. But I checked the rates again today, and was sad to see they’ve been dropping quite fast recently. The current Ally Bank 5-year CD rate is 1.60% APY (as of 10/25/13). I decided to compile the rate history from as far back as I’ve been tracking them.

There have been a few small rate hikes, but for the most part the rate has been gradually dropping due to market conditions. If you’ve been thinking about buying, I would buy now before rates drop even farther. When opening a CD, remember they have a “10 Day Best Rate Guarantee” in which you get the best rate they offer within 10 days of opening. You can now also find slightly better rates elsewhere, for example Alliant Credit Union has their 5-year certificate at 2.35% APY (2.45% for $25k+), but with a larger 6-month interest penalty. I’ll probably still buy a little more at 2.17%, but if the rate drops below 2% then I’m looking elsewhere.


  1. Jonathan, I am also disappointed in Ally’s (and everyone else’s) seemingly ever-dropping APY’s. Any thoughts on investing in short-term bond funds instead? There is some risk, but I think it is slight.

  2. I’ve been picking up beaten down corporate bonds. See BP mid-way last year or EK debt today. Definitely higher risk than a CD though.

  3. With the Fed promising to keep their rates at or near 0 through 2013, its no surprise that long term CD rates are tanking recently. I would even expect that there will be continued drops in rates everywhere you look.

  4. Based upon current inflation rate it does not pay to invest in any 5 year CD. Your real return won’t keep up. With that said, I would rather put my money in other investments.


    Ouch. With inflation inching toward 4% we all need a better place to stash our hoards!

  6. I agree that it can be hard to keep up with inflation, but you have to be careful when reaching for yield not to take too much risk. I-Bonds are still a good option for those that haven’t filled up at $10k per person per year, but after that the options are getting slim. I still like muni bonds through a Vanguard fund for diversity and low cost personally, but not for my emergency funds.

  7. @Jonathan: It’s damn if you do damn if you don’t. If you put it in a 5 year CD you are losing against inflation. If you put it in a higher yield investment and it defaults your are stuck. I’m willing to risk default (which is low for most investments or can be minimized) to yield a higher return.

    inflation or default nets the same result – investment is losing money in real dollars.

    Hence my post “There is no such thing as a ‘risk free’ investment”

  8. Discover Bank’s 10-year CD has a larger penalty (9-mo interest), but its yield is much higher (3.00% APY as of 9/4/11). It’s not as good of a deal compared to Ally’s 5-year CD when closed within 2 years from opening the CD. However, it becomes a better deal if you keep it for more than 2 years.

  9. I don’t think it’s entirely fair to be so critical of the falling yield at Ally on the 5-year CD when considered in light of historically low treasury rates. The 10-year Treasury just fell under 2%…how could anyone expect long-term CD rates to not follow? Ally continues to offer a compelling deal in my view, given their very generous withdrawal penalty (only 60 days).

  10. It’s not meant as a critical attack, just an observation that you should actually get in now rather than later, if you think this is a compelling deal. I still do, which is why I’m still buying, but possibly for not much longer.

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