Ally Bank Review: Online Savings, 9-month, and 12-month CDs

You may have been seeing a bunch of purple ads for something called Ally Bank recently. Actually, this “new” bank used to be GMAC Bank. But besides a cosmetic name change, they have revamped the website and tweaked their product offerings. Their pitch: “No minimum deposits. No monthly fees. No minimum balance. No sneaky disclaimers.”

Here are the products that are most compelling, with interest rates:

12-month CDAn Ally Bank 12-month CD has a top rate available for a 12-month CD with no minimum deposit restrictions. Interest is compounded daily.

No-Penalty 11-month CD – No early withdrawal penalty, daily compounded interest. With an uncertain future rate outlook, this seems like a good compromise between a savings account and a CD. If rates stay low (or get lower?!) you can stay in the CD and get a great return. If rates start rising, you can keep earning the higher rate up until you withdraw without penalty.

APY Online Savings Account – A competitive rate for an online savings account, a la Capital One 360 and such. No minimum balance, no fees, as you’d expect. Daily compounded interest. A differentiating factor to this account is their fast and easy transfers between Ally and your other banks.

FDIC Coverage & More
I noticed that they now also offer 24/7 telephone customer service and even share the current wait time online. Neat idea, I wish more sites did this:

Ally Bank is FDIC-insured, which means accounts are insured at least to $250,000. The new $250,000 limit was recently extended to at least the end of 2013, after which it is still $100,000.

Comments

  1. If there’s no penalty, what would be the point of leaving the money in the account versus the 9-month CD?

  2. Why would you put your money into a CD earning 2.8% when there are many money market accounts that will give you that and more? (Vanguards Short-Term Investment-Grade Fund Investor Shares (VFSTX) gives me a 7.02% YTD return)

    Doesn’t make sense to me…

    (this is not a commercial, just explaining why I think a CD in this case is not worth it)

  3. Dean – VFSTX is NOT a money market account, not even close. Yes, YTD it is 7.02%, but only 0.81% over the past year. Both of these figures are due to share price changes.

  4. Baughman says:

    I’ve been with GMAC bank for 5 years now (now Ally). Be aware that GMAC bank did a hard credit pull when my wife and I applied. There was an error on my wife’s credit report, so we were actually denied at that time. I had to re-apply by myself the next day to qualify while we resolved the discrepency. If you’re married, I don’t recommend the joint account.

    I still haven’t transitioned to their online savings account; I still have their money market account with check-writing and debit card capability for up to 3 checks and up to 6 withdrawals/month. It comes at a 0.35% interest penalty under the online savings account; I’ll switch over soon enough to the online savings, but I really have been enjoying the check-writing capability.

    Their transfers are fast. I’ve had no problems with customer service; I highly recommend.

  5. I’m sorry, I didn’t mean for that to come out as saying it was a money market. I was just saying that there are other alternatives that will give you a better rate or return.

    Also, I am not sure where you are getting the .81% from but I pulled this from Yahoo

    VANGUARD SHORT TERM INVESTMENT
    Net Asset Value: 10.16
    Trade Time: May 29
    Change: Up 0.06 (0.59%)
    Prev Close: 10.10
    YTD Return*: 4.15%
    Net Assets*: 10.57B
    Yield*: 4.79%

  6. Froderick says:

    No penalty 2.5% me like

  7. After becoming Ally and when HSBC dropped their rated to 1.55% I decided to open an online savings and 4 CD accounts. They have not been able to verify my address and couldn’t even locate supporting docs I faxed them 3 weeks ago. It’s really disappointing though!

    However, Ally doesn’t do a credit check for online savings account but it does so for a CD account.

  8. The perk of the CD is no minimum investment.

    To Baughman (& others) – I have also been a customer for a few years. I initially did not switch over to the online savings either, because it came with a lot of fees/catches. However, when I saw a few months ago they had dropped all the fees/minimums, I opened an Online Savings account. I actually keep a minimal amount in my money market account but can make an instant transfer if I want to write a check, etc. Basically, you don’t have to choose either/or. I have enjoyed being able to keep my checks AND earn a higher interest rate.

    GMAC has generally had better rates for the long term, and better customer service, than any of the other online banks, IMHO. I was happy with them before, but the changes have been nice. I wouldn’t be surprised if their end goal is to phase out their money market accounts though. Which is kind of moot since their transfer time to external accounts is pretty fast anyway.

  9. Well, the no penalty CD is nice but if you withdraw you have to take out the entire amount. With the savings account you can transfer back and forth, pay bills from it, etc. Basically you get flexibility.

  10. From Vanguard portfolio allocations, 1926-2008.
    100% bonds 5.5% average annual return
    80% bonds/20% stocks 6.7%
    70%bonds/30% stocks 7.2%
    60%bonds/40%stocks 7.7%
    50%bonds/50%stocks 8.1%

  11. MaryAnn says:

    Bank Deals web site has a post saying American Bankers Association issued a letter complaining about Ally Banks high deposit rates. They want them to force them to a standard.

  12. MaryAnn says:

    Forgot to say the letter from ABA was to the FDIC.

  13. @Terry – Thanks! I’m going to go hunt down more of those 50/50 funds!

  14. I don’t understand why some readers are trying to compare the return on a bond fund to a CD. The CD is guaranteed, period. A bond fund is not FDIC-guaranteed and while the rate of return may be higher, the principal itself can drop.

  15. Michael says:

    I have been a customer with GMAC (Ally) for over a year now. I have the online savings account and multiple CD accounts. I have been nothing but pleased with the service that I have received from them. I consider myself a difficult customer so this is no small feat.

  16. Other information on allocations:

    70% bonds / 30% stocks 7.2% average annual return
    Years with a loss 14 (1926-2008)
    Worst year -14.2%
    Best year 28.4%

    Like others have stated, you can lose money over short time (6 months to over 1 year).

  17. I’ve been using them. Just added a few CDs here. The UI is better than the old GMAC one. This is the first I’ve heard of the FDIC limit being extended. Good to know!!!

  18. @Terry – Where can I get more information on these? I’m a relatively new investor, so I don’t really know much about anything. Thanks! :)

  19. Froderick says:

    “The new $250,000 limit was recently extended to at least the end of 2013, after which it is still $100,000.”

    I’m surprised there wasn’t a separate blog post about this earlier. As a reader I need to be kept up to date on this kind of stuff.

  20. Re having to pull out the entire amount on a penalty-free CD, what I did was set up several smaller CDs instead of one larger CD. That way if I only need, say, $2000, I can break some but not all of the CDs and keep the rest at the 2.5% rate. I have a big credit card bill due in August (thanks Jonathan for that), and I do plan to pull out some of the CDs.

  21. Does Ally send plenty of documents for every account opened? ING did this for a CD ladder and one can get too much clutter, not to mention all the trees, ink and time spent mailing these and throwing them away…
    Anyone knows of a FREE site to research mutual funds where rquivalent allocated funds by investment houses are compared as opposed to just within, eg. equivalent funds in Vanguard vs USAA?
    Thanks.

  22. On Ally’s website there is a $20 fee for domestic outgoing wires. Does that mean any transfer from Ally to another bank gets hit with a $20 fine??? Is there a difference between an electronic transfer and an outgoing wire???

  23. Tim: Typical bank to bank transfers would be done by ACH (not wire)–which presumably would not have a fee (like the other online banks). Wires are done on a wire by wire basis (making them costlier)–whereas ACH transfers are done in batches (making them cheap). Also, wires generally are not reversible (unlike ACH)–so have added risk.

  24. I recommend GMAC. but we must first talk with customer service and decision-making for you the best selection. I think everyone should have their own account, if you’re married.

  25. Margaret says:

    I read on another blog where the American Bankers’ Association has written to the FDIC requesting them to ask Ally to refrain from paying competitive rates. I was about to haul some cash our of Wachovia and Dollar Savings Direct to take advantage of Ally’s better rates but wonder if I could make it in time before their rates get nixed if they do in fact get nixed. Has anyone else read up on this issue — maybe this will be my last change to earn a little more favorable rate before they deteriorate further.

  26. Jeremy Olexa says:

    I just started my CD ladder there last week. Process went smooth and customer service is very responsive. I recommend Ally with my limited experience with them.

  27. I have been GMAC customer for few years. They were giving the highest rate on their money market a/c then they changed to online savings a/c. I was not interested to use checking or ATM, so change over to online savings since the rate is higher than money market. I have created several small no penalty CD’s, so when I need the cash I have to break a small CD rather than one large CD. I am overall satisfied with customer service.
    Now they started online statement which I like. The only negative is that when CD matures you can not do it online cash out or renew to new term; one has to call in CSA. ING direct allows it, I wish Ally to change this, may be in near future.

  28. Steve J says:

    This bank has piqued my interest with its ‘we aren’t evil’ pitch. Their rates might be going down soon because of some pressure from the big banks.

    http://www.aba.com/aba/documen.....r52709.pdf

    Basically, the big banks don’t think its fair that a small, undercapitalized bank is offering such good savings rates. They seem to think that high savings rates are bad for the FDIC. The FDIC agreed (www.fdic.gov/news/board/May29no8.pdf) and from what I understand Ally bank will be required to only offer a interest rate 75 basis points higher than the ‘average’ savings interest rate.

  29. enonymous says:

    weird, my comments about the ABA protesting Ally’s higher rates didn’t show up

  30. enonymous says:

    well it won’t let me post the link – not sure what is wrong with the comment system…

    anyway just google ‘ABA protests Ally rates’ – that should do it

  31. Why not use a 5 year annuity yielding over 4.50%?

  32. Dean – of course there are other alternatives that might give you a better rate of return, but not without a risk of loss of principle. The purpose of putting money in a CD or money market is getting the best “safe” return. That’s why last year’s problems with some money market funds “breaking the buck” were such a big deal, people were losing money on what was supposed to be safe.

    As for the 0.81% I mentioned, I got that figure from Google Financial, which had the same 7.01% YTD return you mentioned. Yes, YTD (ie from Jan 1 til today) the return is 7.01%, but the trailing 1 year return (ie May 29, 2008- May 29, 2009) is only 0.81%. The difference is due to what I mention above, change in share price. If you look at the chart, since the first of the year the share price has risen 5% (just like other asset classes like the stock market has risen over the same period), while over the 12 months preceeding, the share price has dropped almost 4%.

  33. Froderick says:

    Ashok: What does “call in CSA” mean?

  34. From Ally Bank website (http://www.ally.com/messages/):

    Ally — doing right by you and your money isn’t controversial

    At Ally Bank, we’ve set out to do right by you, the consumer, and your money. In the last few days the American Bankers Association (ABA), a banking industry trade group, has been up in arms over the fact that Ally offers great rates and does right by customers. Now, while upsetting the ABA is not a goal of ours, we feel it’s a strong indication that we’re on the right track.

    We strongly believe instead of lobbying against more competitive rates and for older ways of banking — the ABA should encourage even more healthy competition that benefits both the consumer and banks.

    At Ally, we consistently offer among the best rates in the country, never hide behind fine print and give you 24/7 access to a real human. We don’t think that should be a controversial statement. And we encourage all banks to join us.

    Join us and stand up to make banking better.

    We encourage you to join us in standing up for making banking better for everyone. You can voice your response through Ally (http://survey.confirmit.com/wix/p910320302.aspx) and we’ll forward to the ABA or you can send an email directly to eyinglin@aba.com and let Edward Yingling the CEO of American Bankers Association know what you think.

  35. What ABA is trying to do to affect Ally’s high rates can be viewed as price fixing.

    In the United States, price fixing can be prosecuted as a criminal felony offense under section 1 of the Sherman Antitrust Act. Prosecutions may be handled by the U.S. Department of Justice or by the Federal Trade Commission. Many State Attorneys General also bring antitrust cases and have antitrust offices, such as Virginia, New York, and California. Private individuals or organizations can bring their own lawsuits for triple damages for antitrust violations and also recover attorneys fees.

    Colluding on price amongst competitors, also known as horizontal price fixing, is viewed as a per se violation of the Sherman Act regardless of the market impact or alleged efficiency of the action.

  36. Margaret says:

    To Ilya:
    Brilliant — you sound as though you have legal experience. I hope Ally Bank is aware of the Sherman Antitrust Act and it seems as though it would be a good basis for a letter to the ABA.

  37. News to me: you cannot transfer directly from DollarSavings to Ally. I will have to send the money to my regular checking acct I used to set up DSD and then transfer it from there to Ally.

    Now I understand the post about using eTrade as a central funding source.

  38. “# Froderick Says:
    June 1st, 2009 at 3:10 pm

    Ashok: What does “call in CSA” mean?”

    What I meant was when a CD is matured, one can not do anything on line. One has to call the customer service and advise what one wants to do with it renew or cash it.

  39. Kirsten says:

    Also, with Ally no penalty CD if you with draw you lose the APY

  40. I find it interesting that with all the credit checks I just read about them doing, and oh yes ease of transfers…. how a theif could transfer 25k from my non-Ally account into his Ally account, oh I got it back but the assistance from Ally for prosecuting is not even happening, zero response from their fraud department and no I have not been told it was accidental, such as 1 digit of an account off. It appears it was plain outright theives, an no assistance catching the guy. hmmmph, heading to higher authorities. But you will never find me banking with Ally. I ask, how many fraud cases does happen in Ally banking daily?

  41. I admit I’m a little green on this but I must ask:

    Why would the FDIC want to regulate what APY’s a bank can offer? So what if other banks complain that it’s “not fair.” Boo hoo?

    I thought the whole point to capitalism was that competition feeds a better product for the consumer. But all I’ve been seeing this past decade or so are monopolies stamping out all the competition and then begging the government to bail them out after they’d failed to manage their money/business properly.

  42. Folks I would not open an account with these theives under any circumstance. I made that mistake and still paying for it. Seems they could not automatic deposit my first paycheck in to the account. so I overnitghed at cost of $52 the check. Seems there was no one there on Saturday to accept the check so It was not delivered unitl Monday morning. Tuesday my Account showed the check deposited and my available balance was what I was expecting to be, so I started paying my bills. Next morning I now see a negative current balance and multiple 9.00 fees. Called the bank and they informed the check had a 10 day hold on it. So here I sit being payed but not able to access the funds. Next up they start sending out bill pays for bills I expected to have money for. They sent one out the 21st of the month and it has yet to arrives and tomorrow it will be late. Look at my account today and they sent another one to the same place that was not authorized. I have closed the savings account and just waiting for the hold to finally clear and I am gone from this bank. I would not trust ally to take out my trash let alone handle my money.

Speak Your Mind

*