Any Boglehead Not Invested in an Ally CD?

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Postby norm » Sun Feb 06, 2011 5:46 pm

I have my CD ladders with Discover Bank. One of my 5 yr CDs pays
2.97% and the other 2.74%. In addition I have an SBLI savings account paying %3 (unfortunately I can't add more to it).

The balance of my emergency funds are in VFSUX.
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Postby Rager1 » Sun Feb 06, 2011 6:02 pm

cafranci wrote:
.... I wanted to know why no 1099 for 2010 appeared online for me. I got four different answers from the same rep (not done yet, don't know, not enough interest in your accounts, so you won't get one, you will get one, and we're having technical difficulties) and left with no idea of what the situation was. I had to cut and paste the part of their help document to show that I should be receiving a 1099 (combined interest on ALL accounts adding up to at least $10) before she would even acknowledge that I maybe should get a 1099, and even then she couldn't tell if one had been generated for me.


We had a CD with Ally in 2009 which came due in 2010. I called them when we didn't get a 1099 for the 2009 portion of the interest. I was advised that Ally reports the interest when the CD pays out.

We received a 1099 for the full amount of the interest for 2010. We've never had that happen with any other organization.

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Re: Any Boglehead Not Invested in an Ally CD?

Postby Ozonewanderer » Sun Feb 06, 2011 6:51 pm

William Million wrote:At 2.39%, FDIC insured and only 2 months penalty to break, I can't see how anyone would not use these CDs in the current environment. While none of us knows with any certainty which way rates will go, odds are clearly better than 50/50 that rates will rise rather than drop. Vanguard Prime MM pays nothing. Emigrant Direct is only .9%.

Seems to me Ally is offering us all a free lunch. You get a great rate for now, and you cash in the CD if rates rise within the next 5 years.

That 2.39% is for how many years? My credit union is offering APY of 2.53% for 3 years, 2.79% for 4 years, and 3.05% for 5 years - also guaranteed up to $250K. IIRC, there's a one month penalty for early withdrawal after 12 months.
I am glad you brought this up. I think it may be a good time for me to move funds I have in short term bond funds to CD ladder.
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Re: Any Boglehead Not Invested in an Ally CD?

Postby mephistophles » Sun Feb 06, 2011 7:01 pm

all
Last edited by mephistophles on Wed Mar 23, 2011 7:47 pm, edited 1 time in total.
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Postby Silence Dogood » Sun Feb 06, 2011 7:19 pm

Is anyone concerned that Ally's rates will go down after their initial public offering?

How will the IPO affect their products/services?
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Postby nisiprius » Sun Feb 06, 2011 8:24 pm

fishndoc wrote:
But as a practical matter if I had an Ally CD and wanted to break it, and if they demurred, if I went to them with the printed transcript of that online chat and the printed agreement I believe they would break the CD regardless of what the ultimate underlying legality might be. Conceivably they might say "Just this once" or "Only for you because we understand how you could have misunderstood" but I really think they would do it.
Nisiprius, you have more faith in the bureaucracy of "big banks" than I do. I have resisted the lure of putting any cash into a CD with plans to "break" the CD if I got a better offer. I understand this is all an attempt to squeeze out some extra return, but for most of us, if you look at the actual $ amount involved, it's just not worth the hassle or potential hassle.
Oh, I agree with you. I've only used CDs when I expected to hold them to maturity and I've never counted on breaking them. I'm sticking with a big gob of Total Bond Market Index, a small gob of Short-Term Bond Index, $25,000 in a 3.01% Reward Checking account, and the rest in big-whoop ING Direct "Orange Savings." My wife has a couple of 2 and 3-year CDs in her Roth IRA and every intention of holding them to maturity.

I'm just saying, first, that if you buy a CD and the ability to break it played any part in your decision-making, you should know that terms and conditions vary, and you try to find out whether you have the right to break the particular CD you're getting.

In the case of Ally, if I were going to get a CD from them which I don't plan to do, yes, I would take the online chat conversation together with the "deposit agreement" as assurance that I can very likely break the CD. And while I don't have faith in the bureaucracy of big banks, I have a lot of faith in the power of "getting it in writing." But I would not put myself in a position where I would be badly hurt if it turned out that I couldn't break the CD after all.
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Postby 555 » Sun Feb 06, 2011 8:51 pm

Thanks for satisfying my curiosity.
sscritic wrote:If you don't know the history, you should try and find out. There are certain actors whose movies I won't watch, there are certain tv shows I won't watch, and there are certain businesses I won't do business with. My reasons have nothing to do with their acting ability, their enjoyment value or the value provided by their goods and services.

To learn more, google Ally Bank history, GMAC, bailout, TARP, and Ben Bernanke and Timothy Geithner.
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Postby cafranci » Sun Feb 06, 2011 9:01 pm

Rager1 wrote:We had a CD with Ally in 2009 which came due in 2010. I called them when we didn't get a 1099 for the 2009 portion of the interest. I was advised that Ally reports the interest when the CD pays out.

We received a 1099 for the full amount of the interest for 2010. We've never had that happen with any other organization.
Weird. I'm not sure what to do about that then. If I understand correctly, I owe taxes each year on the interest because they credit the account annually. But then I'll be declaring much less interest on my 2015 return than Ally Bank will say they paid me. That's a bit of a dilemma.
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Postby William Million » Sun Feb 06, 2011 10:37 pm

If someone's objection to the 2-month breakable 5-year Ally CD is the fear that Ally could say no, then I think we're getting into somewhat eccentric scenarios. But yes, risk is risk, and I can't deny that I might have more trouble breaking my CD than I anticipate.

However, what would happen? Ally would simply refuse to give me my money, or they would raise the penalty without prior notification? Hard for me to imagine either one.
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Postby FrugalInvestor » Mon Feb 07, 2011 12:15 am

cafranci wrote:
Rager1 wrote:We had a CD with Ally in 2009 which came due in 2010. I called them when we didn't get a 1099 for the 2009 portion of the interest. I was advised that Ally reports the interest when the CD pays out.

We received a 1099 for the full amount of the interest for 2010. We've never had that happen with any other organization.
Weird. I'm not sure what to do about that then. If I understand correctly, I owe taxes each year on the interest because they credit the account annually. But then I'll be declaring much less interest on my 2015 return than Ally Bank will say they paid me. That's a bit of a dilemma.


I just received a 2010 1099 from Ally for 4 CD's of theirs that I own which mature in the future.
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Postby joe8d » Mon Feb 07, 2011 12:32 am

cafranci wrote:
Rager1 wrote:

We had a CD with Ally in 2009 which came due in 2010. I called them when we didn't get a 1099 for the 2009 portion of the interest. I was advised that Ally reports the interest when the CD pays out.

We received a 1099 for the full amount of the interest for 2010. We've never had that happen with any other organization.
Weird. I'm not sure what to do about that then. If I understand correctly, I owe taxes each year on the interest because they credit the account annually. But then I'll be declaring much less interest on my 2015 return than Ally Bank will say they paid me. That's a bit of a dilemma.


I just received a 2010 1099 from Ally for 4 CD's of theirs that I own which mature in the future.


I also just received my 1099 from Ally for 4 CD's and Savings account.I just report the amount on the form as I did last year.
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Postby daytona084 » Mon Feb 07, 2011 12:43 am

cafranci wrote:
Rager1 wrote:We had a CD with Ally in 2009 which came due in 2010. I called them when we didn't get a 1099 for the 2009 portion of the interest. I was advised that Ally reports the interest when the CD pays out.

We received a 1099 for the full amount of the interest for 2010. We've never had that happen with any other organization.
Weird. I'm not sure what to do about that then. If I understand correctly, I owe taxes each year on the interest because they credit the account annually. But then I'll be declaring much less interest on my 2015 return than Ally Bank will say they paid me. That's a bit of a dilemma.


The rules are, as far as I know,

Short term CD's = 1099's report interst in the year it's paid

Long term CD's = 1099's report interest in the year it's earned, regardless of when it's paid.

The dividing line between "short" and "long" is, IIRC, 10 or 11 months.
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Postby stlutz » Mon Feb 07, 2011 12:55 am

I have a couple of their 11 month "no penalty" CDs--when I opened them they basically give you the option on how interest is to be credited/reported. For the one that I chose to have interest credited as it was earned, that was on my 1099; for the one where I chose to have interest credited at maturity, that was not listed on my 1099.

My experience seems to line up with what wjwhitney is saying.
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Postby xerty24 » Mon Feb 07, 2011 1:01 am

wjwhitney wrote:Short term CD's = 1099's report interst in the year it's paid

Long term CD's = 1099's report interest in the year it's earned, regardless of when it's paid.

The dividing line between "short" and "long" is, IIRC, 10 or 11 months.

The line is 1 year. Any period interest payments made at an annual or more frequent rate are taxable that year. "Zero coupon" CDs are taxable at maturity if 1 year or less. For other situations, you get into OID issues and taxation on non-received interest income similar to longer term zero coupon Treasuries. See Pub 550 page 6 for more details.
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Postby cafranci » Mon Feb 07, 2011 10:31 am

wjwhitney wrote:The rules are, as far as I know,

Short term CD's = 1099's report interst in the year it's paid

Long term CD's = 1099's report interest in the year it's earned, regardless of when it's paid.

The dividing line between "short" and "long" is, IIRC, 10 or 11 months.
That was roughly my understanding (though I didn't say it well above). I have four 5-year CDs, and thus I expected to get a 1099. Sounds like from what others say I might get one imminently, so I'll try to be patient.
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Postby beareconomy » Mon Feb 07, 2011 10:42 am

I just got the 1099 from ally for the checking account and the 5 year cds. They combined everything!!!
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Postby tontot » Mon Feb 07, 2011 10:45 am

I am not. I am a fan of Rewards Checking accounts (3-4%)
AA: 80/20 (Equity/Bond), 50/50 (US/International), 40/20/40 (Large/Mid/Small)
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Postby nvboglehead » Mon Feb 07, 2011 11:55 am

Opening an 11-month, no-penalty Ally Bank cd yielding 1.2% APY to replace my emergency fund balance in a VG money market was a no brainer for me.

Going from .06% to a FDIC-insured 1.20% is fantastic!

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Postby Silence Dogood » Mon Mar 21, 2011 7:20 pm

It looks like savings rates just keep going down. The Ally Bank savings and money market accounts now earn 1.00% APY. The two year raise your rate CD is now earning 1.49% APY.
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Postby Sheepdog » Mon Mar 21, 2011 7:36 pm

I am now receiving 3.04% with a rewards checking account on up to $50,000....FDIC insured. That is fitting my cash account and short term special needs (buying a car within the next 12 months.)
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Postby EmergDoc » Mon Mar 21, 2011 7:56 pm

555 wrote:Why would I? I get 3.7% on a (tax-sheltered) Stable Value Fund.


And the G fund is paying 3%.

Although there might be an argument to put part of my savings (at ally) into one of these CDs. The dollar amount isn't that high. 2% of $10K is still only $200 a year. Better than the $100 I'm getting now, but not enough to change my life or date of my retirement at all.
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Postby lazyday » Tue Mar 22, 2011 12:24 am

For those who prefer Penfed breakable CDs over Ally breakable CDs: note that Penfed does not seem to want you to plan on breaking your CD early. Based on their language, high and increasing penalty, and IIRC dropping of no penalty for IRA after a certain age.

That is my impression anyway; I suppose you could ask.

Sure breaking early is allowed, but my guess is that is mainly for unexpected circumstances.

In contrast, Ally brags about their low penalty, and even shows you how much is available at any moment for withdrawal after penalty on screen, should you break the CD now.

So, if you care about the organization or your relationship with it, this might matter to you.
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Postby Dandy » Tue Mar 22, 2011 4:30 pm

I understand how people want to keep things simple and don't want to go through the "hassle" of opening accounts at other banks for a small change in yield. You don't want to end up with 6 banks and money scattered all over. And you can get carried away with chasing small differences in yields.

These days you can move money to and from your brick and mortor bank, Vanguard and on line banks for free in a few days with a few clicks. I love Vanguard and have most of my assets with them. But, you can get 100 basis points (1%)or more by spending maybe 20 minutes setting up an account at an online bank or moving your money to a better on line bank. I was hoping to only use VG MM prime when I retired but the yields are so low I had to look elsewhere.

I would have thought that more people on this forum would be more anxious to not leave money on the table. I see a lot of discussions about how great it is to have Admiral shares and save 10 or so basis points -- and it is.

The Vanguard MM Prime has an 8 basis point yield and in not FDIC guaranteed. Their CD offerings are poor when compared to what is available at on line banks. (I have Vanguard CDs and $$ in Prime MM so I have not followed my own advice completely.)

My only suggestion for those who have a decent amount in CDs, MM, etc is to consider or reconsider a little bit of hassle and a little more complexity for some of that money to get a better return. A poster above did the math and $100 difference was not worth the effort. Great - at least do the math.
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Re: Any Boglehead Not Invested in an Ally CD?

Postby B'Falls_JT » Wed Oct 24, 2012 8:37 am

Folks,

Just a heads-up for those who own, or plan to own, Ally CDs... I recently printed a copy of their Deposit Agreement (found on their web site under "Legal / Agreements / Download our Ally Bank Deposit Agreement"... Thanks to nisiprius for initially pointing this out). Although the agreement is dated June 18, 2011, the last page contains an amendment as of September 27, 2012. This amendment has changed the language around "Early Withdrawals". It used to state "If you withdraw all of the funds you have deposited...". It now states "If we consent to the redemption of a CD or IRA CD prior to the maturity date...".

This could be a game changer for those who would like to cash in their 5-year CDs early in order to take advantage of rising rates (if and when that occurs).

(Sorry if this has already been identified in other posts)

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Re: Any Boglehead Not Invested in an Ally CD?

Postby Firewood42 » Wed Oct 24, 2012 9:23 am

I was reading the posts on this thread and I saw you could get 3 percent on cd's at Pen Fed. Wow I thought now I can cash in some short term bonds and Gnma's and get some 3 percent cd's. Then I happened to look at the date of the post and it was over a year ago. Checked with Pen Fed and the highest you can get is 2 percent on 7 year cds. :(
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Re: Any Boglehead Not Invested in an Ally CD?

Postby Rob5TCP » Wed Oct 24, 2012 9:38 am

B'Falls_JT wrote:Folks,

Just a heads-up for those who own, or plan to own, Ally CDs... I recently printed a copy of their Deposit Agreement (found on their web site under "Legal / Agreements / Download our Ally Bank Deposit Agreement"... Thanks to nisiprius for initially pointing this out). Although the agreement is dated June 18, 2011, the last page contains an amendment as of September 27, 2012. This amendment has changed the language around "Early Withdrawals". It used to state "If you withdraw all of the funds you have deposited...". It now states "If we consent to the redemption of a CD or IRA CD prior to the maturity date...".

This could be a game changer for those who would like to cash in their 5-year CDs early in order to take advantage of rising rates (if and when that occurs).

(Sorry if this has already been identified in other posts)

JT



Thank you for the heads up - that is a major change and I did not notice it. Most of my CD's are with Ally (at 2.7 & 2.4%). However, when it comes time to rollover, that change will be taken into consideration.
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Re:

Postby sadie wess » Wed Oct 24, 2012 4:10 pm

KyleAAA wrote:My only cash investment is my emergency fund. It's not worth the hassle to me to earn an extra $100 per year. I'll just stick with ING Direct.

+1 !! :wink:
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Re: Any Boglehead Not Invested in an Ally CD?

Postby RenoJay » Wed Oct 24, 2012 4:21 pm

What am I missing? I just looked at the Ally CD rates here http://www.ally.com/bank/high-yield-cd/?CP=ppc110174#tabs=rates and it was only 1.65% for five years. Where's the 2.39%?
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Re: Any Boglehead Not Invested in an Ally CD?

Postby bogleblitz » Wed Oct 24, 2012 4:31 pm

RenoJay wrote:What am I missing? I just looked at the Ally CD rates here http://www.ally.com/bank/high-yield-cd/?CP=ppc110174#tabs=rates and it was only 1.65% for five years. Where's the 2.39%?


This thread and rates are from February 2011. You can't get these rates anymore
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Re: Any Boglehead Not Invested in an Ally CD?

Postby kenyan » Wed Oct 24, 2012 4:41 pm

Good to know. I don't foresee a problem in the near future, since my CDs are paying 2.4%, but I might worry about liquidity - which I do want on these - if rates rise beyond that.
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Re: Any Boglehead Not Invested in an Ally CD?

Postby neurosphere » Wed Oct 24, 2012 4:52 pm

bogleblitz wrote:This thread and rates are from February 2011. You can't get these rates anymore

What?! But the OP said in his original post:

I can't see how anyone would not use these CDs in the current environment. While none of us knows with any certainty which way rates will go, odds are clearly better than 50/50 that rates will rise rather than drop.


I guess they dropped. :D
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Re: Any Boglehead Not Invested in an Ally CD?

Postby Alan S. » Wed Oct 24, 2012 6:33 pm

Perhaps the time has finally come for Ally to make some progress repaying the TARP, and they don't want any "run on the bank" in the form of early CD withdrawal to get in the way. It seems logical that the Canadian sale and the CD Notice are related, and that Ally might be anticipating liquidity issues:

http://dealbook.nytimes.com/2012/10/23/ ... 1-billion/
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Re: Any Boglehead Not Invested in an Ally CD?

Postby RenoJay » Wed Oct 24, 2012 8:21 pm

Thanks for pointing out the date...I thought I was going crazy. Ironically, I think I did lock in an Ally 5 Year CD around the time this thread was started since I have one that is yielding exactly 2.4%.
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Re: Any Boglehead Not Invested in an Ally CD?

Postby zaboomafoozarg » Wed Oct 24, 2012 11:05 pm

Nah, I do I Bonds. Comparable interest rate, 3 month penalty to break (after 1 year mandatory holding) - but tax-deferred.
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Re: Any Boglehead Not Invested in an Ally CD?

Postby tfb » Thu Oct 25, 2012 8:32 pm

B'Falls_JT wrote:This could be a game changer for those who would like to cash in their 5-year CDs early in order to take advantage of rising rates (if and when that occurs).

One customer reported that Ally customer service reps are instructed to say that this is a clarification of existing policy, meaning it applies to both new and existing CDs.

I've just talked to Ally customer service and they're clearly being told to state that it's not a policy change but instead 'simply a clarification' of existing policy.

Basically the outcome is that it applies now (and *always has*) to all existing and new CDs. That's it. Plain and simple.

http://www.depositaccounts.com/blog/201 ... html#56655
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Re: Any Boglehead Not Invested in an Ally CD?

Postby happymob » Fri Oct 26, 2012 6:12 am

Keep in mind that CD rates are often negotiable for large deposits at smaller banks. It seems weird to barter for banking services, but your local bank might price-match the Ally rate if you are bringing enough money to the table. A couple years ago, we got a local bank to almost match Ally terms on a 5-year CD (-0.10% on the rate and they matched the 60-day interest penalty). Other banks were willing to negotiate as well. None of the local banks we talked to were firm about their published rates.
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Re: Any Boglehead Not Invested in an Ally CD?

Postby surfer1 » Fri Oct 26, 2012 12:44 pm

Here is Allan Roth's thoughts after calling Ally Bank about the change to the early withdrawal terms. Apparently, the policy has not changed, just the wording. They'll still allow early withdrawals with the penalty:

http://www.cbsnews.com/8301-505123_162- ... icy-on-cds
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