Ally Bank No penalty CD for parking cash, is there a catch?

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marcopolo
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Ally Bank No penalty CD for parking cash, is there a catch?

Post by marcopolo »

Looking at parking a fairly large amount of (newly acquired) cash that I will need to start drawing in about 9-12, to finance construction of a home.

I was originally planning on just parking it in one of the higher yielding savings accounts currently available (Synchrony, Ally).

But, then i noticed Ally has an 11-month No-Penalty CD paying 1.35%, 30 basis points higher than their savings account. This is the same yield as their one-year CD which does have an EWP, and better yield than their 9-month CD.

That seems odd that a longer tie-up of money yields the same rate, and has an EWP. So, i figure I must be missing something.

Anyone have any experience with Ally No-Penalty CD? Does this make sense as a good place to park cash needed in 9-12 months? Any better options you would recommend?
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runner3081
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by runner3081 »

No catch. I have been in and out of their no-penalty CD's in the past. Only bad thing is the wait of a few days to transfer money in/out.
hirlaw
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by hirlaw »

I have a money market account (.85% interest) and a savings account (1.05% interest) at Ally. I recently moved a large chunk of the savings account to the 11 month "no penalty" CD to take advantage of the higher rate (1.35%). The only "catch" I see is that you have to leave your money in for at least 6 days.

My guess is that the CD will renew at a lower rate and that they make money on those who deposit funds and leave them at Ally in that CD or other accounts.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by tibbitts »

I had the 1.25% Ally CD and am on the phone now with Ally. There appears to be no way to transfer the money directly online from the old CD to a new 1.35% CD, so they're doing it for me. You can redeem your CD to a savings or even external checking or saving account only but not directly to another CD, even if you create the (empty) CD first. Or at least Ally couldn't explain to me how to do it.

I believe there's a risk of losing the 1.35% rate (and in fact the 1.25% rate as well) if Ally lowers the rate between now and when the transaction (even though it's internal) occurs. So it seems like it's possible I could be losing some percentage yield by doing this, no matter when I execute the transaction. Ally has a 10-day rate guarantee but it only kicks in once an account is funded, not when it opens. Well, the 10 days starts when it's opened, but the guarantee only starts when it's funded. So that would be a "catch."
jbuzolich
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by jbuzolich »

6 day hold and that's it. Bought a couple about two months ago and had to redeem one already to shuffle things around as wife bought a new car. Super easy and I've already moved some back into other CDs also with Ally. Really enjoying using that bank. Makes me think about using their checking.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by radiowave »

jbuzolich wrote:6 day hold and that's it. Bought a couple about two months ago and had to redeem one already to shuffle things around as wife bought a new car. Super easy and I've already moved some back into other CDs also with Ally. Really enjoying using that bank. Makes me think about using their checking.
The only minor issue with the Ally checking is that there doesn't seem to be a way to put in a memo on the check online or other information who the check was for. It does have a check image. If I'm wrong on that, someone please let me know.
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Benton Bair
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Benton Bair »

Goldman Sachs online bank is offering a savings account at 1.2% APY as of this writing.
runner3081
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by runner3081 »

radiowave wrote:
jbuzolich wrote:6 day hold and that's it. Bought a couple about two months ago and had to redeem one already to shuffle things around as wife bought a new car. Super easy and I've already moved some back into other CDs also with Ally. Really enjoying using that bank. Makes me think about using their checking.
The only minor issue with the Ally checking is that there doesn't seem to be a way to put in a memo on the check online or other information who the check was for. It does have a check image. If I'm wrong on that, someone please let me know.
Doesn't apply to the CD the OP asked about.
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marcopolo
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by marcopolo »

Thanks everyone. I think i will go ahead and utilize the No-Penalty CD offer to park some cash for a little while.
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*3!4!/5!
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by *3!4!/5! »

How is interested accrued? If you cash out after, say 2.8 months, would you get the full 2.8 months interest, or would you just get 2 months interest because that's the number of whole months you were in?
Money Market
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Money Market »

I personally use Northpointe bank (5% on $10,000), Lake Michigan Credit Union (3% on $15,000), and Insight prepaid card (5% on $5000) as parking for my emergency​ funds. NP and LMCU are rewards checking accounts so you have to satisfy 10-15 debit card purchases and direct deposit requirements. If you're interested in NP, I can get us both $25 referrals.

Ally is great, but the interest rates are way too low
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by lazyday »

tibbitts wrote:I had the 1.25% Ally CD and am on the phone now with Ally. There appears to be no way to transfer the money directly online from the old CD to a new 1.35% CD, so they're doing it for me. You can redeem your CD to a savings or even external checking or saving account only but not directly to another CD, even if you create the (empty) CD first. Or at least Ally couldn't explain to me how to do it.
A little late now, but couldn't you have just redeemed the old cd into an ally savings account (online so no delay to get the money) and then immediately used it to open a new 1.35% cd?

https://www.depositaccounts.com/banks/ally-bank/offers/
Using Ally Bank’s online CD management system, you can close a CD without help from a CSR. According to an Ally Bank CSR, “when you make the request online via the Manage CDs link, the account is normally closed and the funds transferred internally immediately.” You can still make the request by phone or secure chat, but that will take “up to 1-2 business days.”
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by kappy »

*3!4!/5! wrote:How is interested accrued? If you cash out after, say 2.8 months, would you get the full 2.8 months interest, or would you just get 2 months interest because that's the number of whole months you were in?
Interest accrues daily.
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marcopolo
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by marcopolo »

Money Market wrote:I personally use Northpointe bank (5% on $10,000), Lake Michigan Credit Union (3% on $15,000), and Insight prepaid card (5% on $5000) as parking for my emergency​ funds. NP and LMCU are rewards checking accounts so you have to satisfy 10-15 debit card purchases and direct deposit requirements. If you're interested in NP, I can get us both $25 referrals.

Ally is great, but the interest rates are way too low
Thanks for the info. But, those all look like they only pay those rates for the first $10k/15/5k, respectively. The rates then drop off quite dramatically.
I am looking to park quite a bit more than that, the blended rate would be significantly less than Ally rate. I suppose i could split into multiple accounts at various banks, but probably not worth the hassle for short term.
Last edited by marcopolo on Sat Jun 17, 2017 9:02 am, edited 1 time in total.
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tibbitts
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by tibbitts »

lazyday wrote:
tibbitts wrote:I had the 1.25% Ally CD and am on the phone now with Ally. There appears to be no way to transfer the money directly online from the old CD to a new 1.35% CD, so they're doing it for me. You can redeem your CD to a savings or even external checking or saving account only but not directly to another CD, even if you create the (empty) CD first. Or at least Ally couldn't explain to me how to do it.
A little late now, but couldn't you have just redeemed the old cd into an ally savings account (online so no delay to get the money) and then immediately used it to open a new 1.35% cd?

https://www.depositaccounts.com/banks/ally-bank/offers/
Using Ally Bank’s online CD management system, you can close a CD without help from a CSR. According to an Ally Bank CSR, “when you make the request online via the Manage CDs link, the account is normally closed and the funds transferred internally immediately.” You can still make the request by phone or secure chat, but that will take “up to 1-2 business days.”
When I initially opened the CDs, I funded them by transfer online myself from Ally savings 5 months ago, and I remembered, maybe incorrectly, the transfer not happening immediately, but I wasn't sure. That was exactly why I wanted to transfer directly - I thought it might be faster. The rep told me last night that I could do that online, but when she tried to walk me through it, there was no choice to redeem the CD into a new CD that I had just opened so that's how the process evolved for me. My first thought would have been what you suggest but I discounted it because the odds of the balance updating immediately, at least in a way visible and accessible to me, didn't seem likely.

When she did the process she didn't have to "park" the money anywhere, it was a direct transfer, but as you say it will still take time, which is what I was trying to avoid. Possibly what you said would have worked. Maybe someone else can try that and find out.
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HueyLD
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by HueyLD »

When you redeem a CD early, the balance (P&I) can be transferred to your online savings at Ally immediately. And you can turn around and open a new CD with the money.

However, opening a new CD doesn't mean an account will be opened right away, especially if you have entity accounts such as a UTMA or trust. Those will require additional paperwork scrutiny and may take 3-5 business days.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Money Market »

marcopolo wrote: Thanks for the info. But, those all look like they only pay those rates for the first $10k/15/5k, respectively. The rates then drop off quite dramatically.
I am looking to park quite a bit more than that, the blended rate would be significantly less than Ally rate. I suppose i could split into multiple accounts at various banks, but probably not worth the hassle for short term.
You should consider these banks then. These are all savings accounts and don't have any requirements other than a minimum deposit
  1. Self Help CU – 1.31% APY (1.41% for balances $500K+) (costs $5 to join the credit union)
  2. BankPurely – 1.3% APY savings account
  3. ableBanking – 1.3% money market
I'd recommend #1 since it's a credit union, has a clean website, and most importantly, has good reviews and a history of raising rates on bankrate.
Last edited by Money Market on Sat Jun 17, 2017 1:23 pm, edited 3 times in total.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by pasadena »

marcopolo wrote:Looking at parking a fairly large amount of (newly acquired) cash that I will need to start drawing in about 9-12, to finance construction of a home.

I was originally planning on just parking it in one of the higher yielding savings accounts currently available (Synchrony, Ally).

But, then i noticed Ally has an 11-month No-Penalty CD paying 1.35%, 30 basis points higher than their savings account. This is the same yield as their one-year CD which does have an EWP, and better yield than their 9-month CD.

That seems odd that a longer tie-up of money yields the same rate, and has an EWP. So, i figure I must be missing something.
This is most probably a promotional rate. Last year they raised it to 1.25% (for all tiers) but that only lasted 3 weeks. I have one of those. I would take up their current offer, but I'm a bit short of $25,000 in my EF so I can't do that right now. As far as I can see, there is no catch, and as the name says, absolutely no penalty. Your money is available entirely after 6 days. Be aware, though, that you can't withdraw only part of it. Any withdrawal will close the account.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by tibbitts »

HueyLD wrote:When you redeem a CD early, the balance (P&I) can be transferred to your online savings at Ally immediately. And you can turn around and open a new CD with the money.

However, opening a new CD doesn't mean an account will be opened right away, especially if you have entity accounts such as a UTMA or trust. Those will require additional paperwork scrutiny and may take 3-5 business days.
That's good to know, although it's disappointing that the rep wasn't aware of that. I explained my objective was to capture the extra .1% rate and I was online at the time and could have done the transactions that way. I did the open process for the new accounts online but the interface does not have the option to redeem to a CD as the rep had thought it would have. She tried to walk me through that but the option was just not there, and she didn't know that the process of going through the savings account would have been instantaneous. It's confusing so I don't blame her for being unaware that that wasn't an option, and it's non-intuitive that redeeming through a third account should be faster than transferring directly, which is effectively what she did.

I do believe that given the funds are already at Ally they should have a policy that initiates the rate guarantee immediately upon making a transfer request no matter the means through which the request occurs. I did ask specifically about that policy and the rep said that the guarantee would apply from yesterday, but I'm pretty sure she was wrong.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by marcopolo »

pasadena wrote:
This is most probably a promotional rate. Last year they raised it to 1.25% (for all tiers) but that only lasted 3 weeks. I have one of those. I would take up their current offer, but I'm a bit short of $25,000 in my EF so I can't do that right now. As far as I can see, there is no catch, and as the name says, absolutely no penalty. Your money is available entirely after 6 days. Be aware, though, that you can't withdraw only part of it. Any withdrawal will close the account.

Thanks for the info, very helpful. That leads me to open several different CDs instead of one single one, as I will be drawing the money over the course of a year as the home construction progresses.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Jcdoc107 »

Is there any difference between having the interest payed at maturity vs monthly if it is credited to the CD? Is there a best way to do this if you are only going to keep the money in the CD for 6 months?
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Kevin M »

Opened two @$25K last week. I did this because $25K is the minimum to get the 1.35% rate, and Ally does not allow partial withdrawals. So I'd stick with $25K increments for maximum flexibility.

The "manage CDs" menu option does not appear unless you have an open CD in a taxable account. This option was not visible for me until the next business day after opening the first CD. The manage CD functionality is not supported for IRA CDs, so you won't see it if you have an IRA CD but no taxable CDs (my case before last week). I had previously had taxable CDs at Ally, so was familiar with the manage CDs functionality. I even published a blog post on it in late 2015: New Online CD Management Functionality at Ally Bank.

The CD is funded immediately from an Ally savings or checking account, but you can't see transaction history immediately, nor do you see the transaction in the funding account. These become available by the next business day. I opened one on Saturday and had access to the transaction histories on Monday, then opened one on Thursday and had access on Friday.

All of this is for CDs in an individual account with POD designation. I started at Ally with trust accounts, but quickly learned that opening accounts is faster and easier with POD accounts, and POD accounts accomplish my objective of probate avoidance. I opened a lot of CDs at Ally in 2010-2011.

A also use a reward checking account (RCA) that earns 3%, but the balance cap is $15K, so it has limited usefulness. I just keep it as close to $15K as possible. I used to have two RCAs, but am no longer interested in doing that. I easily meet the 10 debit card purchases per month requirement with minimal changes to my purchasing patterns (I use the RCA card for my first 10 small purchases each month).

There are several savings accounts offering 1.25-1.30% (Savings Account Rates | DepositAccounts.com), but I'm not interested in opening another bank account for just a few dollars more in interest, whereas opening one or more 1.35% CDs at Ally takes about five minutes.

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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Kevin M »

Jcdoc107 wrote:Is there any difference between having the interest payed at maturity vs monthly if it is credited to the CD? Is there a best way to do this if you are only going to keep the money in the CD for 6 months?
You cannot credit it to the CD if you choose monthly disbursement. The only choices are check or deposit into an account. At least this is what I see in the manage CD functionality.

If you choose "at maturity", the additional choice of "credit to the CD" becomes available (and is the default when you open the CD).

I would choose credit to CD at maturity, unless you want/need the cash flow, since this is the way you earn the 1.35% APY. If you take monthly disbursements, you'll earn slightly less since your interest won't compound.

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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by tibbitts »

So I asked another Ally rep, and she concurred with the first rep that the ten-day guarantee starts when the CD is opened, not when it's funded. And indeed the Ally documents on the web seem to back that up. So perhaps my information (which I'd read on a blog somewhere) was wrong and indeed the minimum rate is locked for ten days after opening, so long as the funding occurs within those ten days.

However this rep also said that I wouldn't be able to redeem a CD online and then buy another with it the same day, which apparently contradicts some previous posts in this thread.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by protagonist »

No catch. But you can get close to that in many regular online bank accounts from which you can easily draw checks, transfer funds, make deposits, etc. 1.35% is slightly higher, but for that you pay with a degree of flexibility. If the amount you are parking for 9 months is large enough that .2 or .3% makes a significant difference and you don't need the money until then it is not a bad deal. They are a good bank.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by forkhorn »

This post inspired me to open the no penalty CD today. I keep my main cash emergency fund with Ally anyway, and had just never looked into the CDs. So I moved a chunk of it into the 1.35% no penalty CD. It seems like there is just no downside. If interest rates climb, I just close the account. Thanks.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by lazyday »

tibbitts wrote:However this rep also said that I wouldn't be able to redeem a CD online and then buy another with it the same day, which apparently contradicts some previous posts in this thread.
Like you said, someone needs to test it. :)

I have a small 5 year cd to use in case I run out of cash. If I ever break it, I'll post how quickly the money shows in my savings account.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by MikeG62 »

Rate increased to 1.50% this morning on the no penalty CD!
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by marcopolo »

MikeG62 wrote:Rate increased to 1.50% this morning on the no penalty CD!
Thanks for the update!

My procrastination in getting the money transferred to Ally seems to have paid off.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by HueyLD »

marcopolo wrote:
MikeG62 wrote:Rate increased to 1.50% this morning on the no penalty CD!
Thanks for the update!

My procrastination in getting the money transferred to Ally seems to have paid off.
No necessarily. You can get the 10-day rate guarantee.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by robertmcd »

Do I need to contact them to get my rate bumped since I am in the 10 day window?
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by HueyLD »

robertmcd wrote:Do I need to contact them to get my rate bumped since I am in the 10 day window?
Yes, you should.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by lack_ey »

lazyday wrote:
tibbitts wrote:However this rep also said that I wouldn't be able to redeem a CD online and then buy another with it the same day, which apparently contradicts some previous posts in this thread.
Like you said, someone needs to test it. :)

I have a small 5 year cd to use in case I run out of cash. If I ever break it, I'll post how quickly the money shows in my savings account.
Breaking a CD at Ally to transfer to another Ally account and opening a new CD at Ally funded by money from another Ally account are both instant actions.

I had $8k in a no-penalty CD at 1.25% and just broke it to renew with this new offer at... 1.25% (I'm under the $25k min for the higher rate). That just extended the term on the 1.25% rate. It's possible other cash rates are better by the time the original no-penalty CD would have matured, but whatever.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Kevin M »

Great news about 1.5% on $25K or more. And now 1.25% on $5K or more.

I opened my two on June 10 and June 15, so got online chat to see if 10 day rate guarantee would apply to both, and if it would be applied automatically. Not applicable to the one opened June 10 because today is day 11, but of course applicable to the one opened June 15. I asked if the higher rate would be applied automatically, and when I'd see it (still showing 1.35% as of now). He said the rate would be applied automatically, and I should see it updated by tomorrow.

For the other one I asked if we could just do an early withdrawal and have it deposited directly into a new CD at the higher rate. I just told me about the manage CD functionality. I asked if the money would be available immediately to fund the new CD, and he said it would.

I closed the CD, saw the money available in my checking account, opened the new CD at the new rate, and funded it from my checking account. Everything looks good.

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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by HueyLD »

Kevin M wrote:I asked if the higher rate would be applied automatically, and when I'd see it (still showing 1.35% as of now). He said the rate would be applied automatically, and I should see it updated by tomorrow.
My impression is that their employee training is not that great and one may get different answers depending on whom one talks to.

My phone rep told me that the rate bump will happen on day 11 rather than the next business day because they wanted to wait out the entire 10-day period to avoid having to do the paperwork more than once.

I will monitor the progress in the mean time.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Taco Knight »

kappy wrote:
*3!4!/5! wrote:How is interested accrued? If you cash out after, say 2.8 months, would you get the full 2.8 months interest, or would you just get 2 months interest because that's the number of whole months you were in?
Interest accrues daily.
Sorry, but this is not my experience. Interest compounds daily, but it is only accrued once a month. In the above case, one would get two months' interest, not two months' and ~24 days'.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Loandapper »

Taco Knight wrote:
kappy wrote:
*3!4!/5! wrote:How is interested accrued? If you cash out after, say 2.8 months, would you get the full 2.8 months interest, or would you just get 2 months interest because that's the number of whole months you were in?
Interest accrues daily.
Sorry, but this is not my experience. Interest compounds daily, but it is only accrued once a month. In the above case, one would get two months' interest, not two months' and ~24 days'.
Not at Ally. Trust me, I've actually done this with them. If you really want to, you can log in every day and see how many pennies/dollars of interest you've accrued. If you closed it in 2.8 months, you'd get exactly 2.8 months of interest... to the day.
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by VictoriaF »

HueyLD wrote:
Kevin M wrote:I asked if the higher rate would be applied automatically, and when I'd see it (still showing 1.35% as of now). He said the rate would be applied automatically, and I should see it updated by tomorrow.
My impression is that their employee training is not that great and one may get different answers depending on whom one talks to.

My phone rep told me that the rate bump will happen on day 11 rather than the next business day because they wanted to wait out the entire 10-day period to avoid having to do the paperwork more than once.

I will monitor the progress in the mean time.
Like Kevin, I have opened my first $25k CD on 10 June 2017. When I called I was told that today being the 11th day, it's not eligible for an automatic bump-up.

Like HueyLD, I called rather than chatted, and I agree that the employee's responses are sometimes not authoritative. I took the name of the representative I talked to, and she said that our discussion will be in my record.

Similarly to HueyLD, I was told that the interest will be updated to a higher rate on the 11th day from opening the CD, i.e., NOT tomorrow. I was told that this would happen automatically, even if I had not called.

I am going to wait until tomorrow to see if by any chance my 10 June CD will receive a face lift. If not, I will close it and open a new one.

Thank you, All!

Victoria
Inventor of the Bogleheads Secret Handshake | Winner of the 2015 Boglehead Contest. | Every joke has a bit of a joke. ... The rest is the truth. (Marat F)
bobkster
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by bobkster »

I confirmed with Ally Bank this morning that one can create both Savings and No Penalty CD accounts, then close the CD, shifting funds to Savings, which should happen in minutes. Then create a new CD online, funding from Savings, again in minutes, as long as the CD is not held in a trust or UGMA entity, which takes 3-5 business days. (Ok to specify the trust as a beneficiary on the CD.) I have yet to try this out to verify the timing. However, as rates climb, seems like a good process to grab the latest.
bobkster
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by bobkster »

Is there an easy way to track ally bank 11 month no penalty cd rates programmatically from a PC - to detect and take advantage of a rise in rates and jump, after the minimum 6-day wait, into a new CD? Simply downloading the <https://www.ally.com/bank/no-penalty-cd/> page content does not include the actual CD rates - which they do to prevent page spoofing (per the ally bank rep I spoke with).
Lastrun
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Lastrun »

I originally had a 11 month CD at a lower rate and a savings account at Ally.

Recently, I closed the 11 month lower rate CD and opened up a new 11 month CD at the higher rate.

I also purchased a new 12 month CD at the promo rate.

I am not sure the whole process took more than 5 minutes.

But I did have a savings account at Ally to move things around.
TonyUncleJohnny
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by TonyUncleJohnny »

Reviving an old thread, as I'm in a very similar situation as the OP.

Large amount of cash, recently acquired, to be used towards a home purchase in the next 2 months to 2 years. Our criteria for a home is quite narrow so the timeline for the search is highly unpredictable.

It feels like a high-yield savings or no-penalty CD would be the best place to park these funds. I'll always have at least a 2 week notice anytime I need the funds. One more thing - these funds are in a trust, and given trust taxation, I would want to distribute interest annually to myself especially if things turn out at the upper end of my estimated timeline of 2 months to 2 years.

I'm comfortable with the 6-10 day transfer time with no penalty CDs, as well as the restriction around withdrawing principal (all or none), provided I can withdraw all interest close to the end of each tax year (for tax reasons mentioned above).

Anything else I should be keeping in mind as I consider the Ally no penalty CD vs High Yield Savings?

Many thanks.
remomnyc
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by remomnyc »

The only thing to be aware of is that you have to withdraw the entire no-penalty CD all at once, so if you know you're going to be making monthly withdraws, I would open up batches of CDs. The Ally no penalty CD is currently 1.6%, the same rate as the Marcus savings rate. Marcus has a 12-month CD paying 2.1%.
TonyUncleJohnny
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by TonyUncleJohnny »

I won't be making monthly or any sort of periodic withdrawals of principal.

The only time I will withdraw principal is when I need it for the home purchase, and when I do, I will need it all. Or when no-penalty CD rates go up, in which case I'll want to come out of the old lower rate CD and get into the new higher rate CD.

I will however want to withdraw interest though once a year right before the year ends, for trust taxation reasons. But my understanding is that withdrawal of interest is not considered closing the CD / touching the principal, and is thus allowed, am I correct?
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HueyLD
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by HueyLD »

Your choices for interest disbursement are:

(1) credit back to CD (paid at maturity);

(2) monthly payments; or

(3) quarterly payments.

There is not an option for payable at year end for no penalty CDs. To get the year end disbursement, you have to open a CD that is not a NP CD.
Chuck
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Chuck »

As mentioned in other threads, Vanguard's Prime Money Market fund is now yielding 1.78%.
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Kevin M
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by Kevin M »

Chuck wrote: Wed Apr 18, 2018 3:46 pm As mentioned in other threads, Vanguard's Prime Money Market fund is now yielding 1.78%.
Exactly. The Ally no-penalty CD is no longer competitive for short-term cash. You can open a trust account at Vanguard.

Another option is Popular Direct savings paying 2.00% APY. https://www.depositaccounts.com/savings/. Minimum deposit to open is $5,000, minimum balance to avoid $4 monthly fee is $500. I don't know if you can open a trust account there or not; in the first screen of the online application, I only see Individual and Joint as choices, but I would call to check if interested.

Also look at municipal money market funds. Vanguard California muni MM taxable equivalent yield (TEY) for me is 2.17%, so that's where I'm holding my cash reserves. This is at federal and state marginal tax rates of 27% and 8%. The (national) muni MM TEY is 2.11% for me.

I recently did early withdrawals from my Ally no-penalty CDs at 1.75% and moved the cash to VG CA MM fund. With a MM fund, you have complete control over distributions. You can have interest reinvested, and then sell shares at the end of the year in an amount equal to the interest, and have the money transferred to your external bank account, if that's what you want to do.

Kevin
If I make a calculation error, #Cruncher probably will let me know.
misterno
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by misterno »

Kevin M wrote: Wed Apr 18, 2018 4:26 pm
Chuck wrote: Wed Apr 18, 2018 3:46 pm As mentioned in other threads, Vanguard's Prime Money Market fund is now yielding 1.78%.
Exactly. The Ally no-penalty CD is no longer competitive for short-term cash. You can open a trust account at Vanguard.

Another option is Popular Direct savings paying 2.00% APY. https://www.depositaccounts.com/savings/. Minimum deposit to open is $5,000, minimum balance to avoid $4 monthly fee is $500. I don't know if you can open a trust account there or not; in the first screen of the online application, I only see Individual and Joint as choices, but I would call to check if interested.

Also look at municipal money market funds. Vanguard California muni MM taxable equivalent yield (TEY) for me is 2.17%, so that's where I'm holding my cash reserves. This is at federal and state marginal tax rates of 27% and 8%. The (national) muni MM TEY is 2.11% for me.

I recently did early withdrawals from my Ally no-penalty CDs at 1.75% and moved the cash to VG CA MM fund. With a MM fund, you have complete control over distributions. You can have interest reinvested, and then sell shares at the end of the year in an amount equal to the interest, and have the money transferred to your external bank account, if that's what you want to do.

Kevin

Kevin

I looked at the webpage for Vanguard California muni MM

But I am not seeing any 2.17% even I backed federal and state taxes

What is the base rate?

I am looking at its webpage and the returns are less than 1%

https://advisors.vanguard.com/web/cf/fa ... 2/overview
misterno
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by misterno »

Chuck wrote: Wed Apr 18, 2018 3:46 pm As mentioned in other threads, Vanguard's Prime Money Market fund is now yielding 1.78%.
where do you see 1.78%

Image
BlackcatCA
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Re: Ally Bank No penalty CD for parking cash, is there a catch?

Post by BlackcatCA »

The SEC yield of VMRXX is 1.84% today, 1.78 earlier in the week.

For tax free muni mm,
Tax equivalent yield TEY = SEC yield of muni mm (tax free)/(1- [federal marginal rate] - [state marginal rate]).
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