After only a week since the last rate hike, Ally Bank increased the rate of its Online Savings Account today by 4 basis points to 0.99%. Ally Bank also raised the rate of its 2-year Raise Your Rate CD. That went up 4 basis points to 1.29% APY. The same rate increases also took effect on the IRA versions of the savings account and CD. The money market account rate remains at 0.85%. So if you have both the savings account and money market account, it makes sense to keep most of your money in the savings account. Thanks to DA members OldGuy and Buckeye61 for posting on this news in the DA forum.
It’s nice to see more rate increases from a major internet bank. It’s interesting that Ally did this rate increase only a week after its last rate increase. Last week Ally raised the rates of its savings account and 2-year Raise Your Rate CD by 5 basis points. This year Ally has only changed the savings account rate four times. At the start of January, the rate was 0.85%. Ally increased this to 0.87% in January, to 0.90% in September and to 0.95% last week.
It’s also interesting that Ally decided to increase the savings account rate to be just short of 1.00%. You would think Ally would have increased it 1 basis point higher just for marketing reasons.
With the rate hike on the 2-year Raise Your Rate CD, customers who already have this CD will have to decide if it’s time to use the rate bump option. I reviewed this issue last week. Those who chose to bump-up their rate last week are probably frustrated that they didn’t wait a little longer. That’s one problem with these bump-up CDs. It’s hard to know when to use the bump-up option.
One interesting thing to note about the new 2-year CD rate is that it’s only one basis point lower than the 4-year CD rate. Both are Raise Your Rate CDs, but the 4-year CD has 2 options during the term to raise the rate whereas the 2-year CD just has one. This also shows another problem with Raise Your Rate CDs. If the bank doesn’t keep the rate competitive, the bump-up option is useless. Customers who have Ally’s 4-year CD are probably frustrated that the rate hasn’t been going up like the other CDs.
Even though Ally’s CD rates are not the best, they do have many nice features such as no minimum deposit requirements and below-average early withdrawal penalties. In addition, Ally does a good job at listing important fees, terms and conditions in its "Straight Talk Product Guide". I have more details on these guides in this post.
Ally Bank continues to have strong growth. Over the last year its deposits have grown by $4.4 billion (8.39%) to $56.8 billion. It has assets of more than $100 billion. Its strong deposit growth may be the primary reason we’re not seeing deposit products that are rate leaders. There have been unofficial reports for the last several years that the FDIC has required Ally Bank to keep the rates on deposits low enough so the bank wasn't one of the nation's top five rate payers. Most of Ally Bank’s rates are below the top five so I don’t think this is an important reason for the lackluster rates.
Ally Bank continues to be financially strong with an overall health grade of an "A+" with a Texas ratio of 1.37% (excellent) based on September 30, 2014 data. Please refer to our financial overview of Ally Bank for more details. The bank has been a FDIC member since 2004 (FDIC Certificate # 57803).
How These Rates Compare
When compared to other savings accounts and similar length-of-term CDs tracked by EpBooks.us that require a similar minimum balance and are nationally available, Ally Bank’s savings account and 2-year CD are shown to be quite competitive: