Ally “No Penalty CD” rate drops to 2.05% APY

July 4th, 2009 · No Comments

A week ago I posted that we were starting a move of our emergency fund cash to Ally Bank in order to take advantage of their “No Penalty CD” product.  This will allow us to stop laddering our funds in 6-month CDs, which are generally sporting pretty low rates right now.  So I was just checking to see if the last transfer had completed when I noticed that they’ve already dropped the rate from a 2.15% APY to a 2.05% APY.

Given that I’ve only been watching the “No Penalty CD” product’s rate for about a week, I’m not sure how fast things are changing over at Ally Bank.  Hopefully, not too fast!

What’s interesting is that this new rate is still higher than their rate for a traditional 9-month term “Classic CD” (1.75% APY) as well as their online savings account (2.00% APY).  That is, because of the high liquidity due to the no penalty withdrawal, it still makes sense to open one of these CD accounts.  In fact, I’m about to do that now with our third month’s worth of income replacement now that the ACH transferred amount shows up in the “available balance” column.

One more thing worth pointing out about the “No Penalty CD” is that there is no way to liquidate one of these online.  You’re going to have to call Ally Bank customer support, which is actually what I did to find this out.  I verified with the representative that there is no limit to how many of these accounts you can create, no fees owed when you pull your funds out, and no limits placed on opening new ones after pulling your money out of old ones.  However, I did learn two interesting things.  The first is that partial withdrawals are not allowed — you’ll have to pull all your money out at once.   And the second is that their system only moves the funds out once a day, so it may take up to 24 hours before your funds end up being transferred.  BTW: Ally customer support is supposed to be available 24/7/365.

The thing that effects our plans the most is the “only full withdrawals” restriction.  I guess we will need to go back to splitting our funds up into multiple accounts, one per month.  However, that’s what we’ve been doing so far because of the differences in time related to transferring the money to Ally in the first place.  So I guess it just means we get to skip the effort of consolidating into a single CD.

Tags: Personal Finance · Savings

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