Why hasn’t Ally raised its Online Savings Rates

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sapphire96
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Why hasn’t Ally raised its Online Savings Rates

Post by sapphire96 »

Hey everyone,

Does anyone know why Ally has not raised its rates since the Fed raised theirs? I remember during the rising interest period before COVID, Ally would raise their rates pretty much in lockstep with the Fed. More of a curiosity than anything else.
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alex_686
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by alex_686 »

Bank’s profit margins were compressed during covid. Savings accounts were basically loss leaders. Most banks are going to try to recover some of their profitability.
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Geologist
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Geologist »

I think alex_686 has one reasonable idea, but I don't really know why anyone on this discussion board would know why Ally (or any particular bank) would change or not change its rates. It's a corporate decision.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Chuck »

Because they don't have to?
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Stinky
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Stinky »

Probably the same reason that Toyota Notes hasn’t raised its rates from 1.15%.

They don’t currently feel the market or financial pressure to raise rates.

If/when deposits start fleeing, they’ll reassess their rate decisions.
Former life insurance company financial officer who sincerely believes that ”It’s a GREAT day to be alive!”
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HueyLD
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by HueyLD »

Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
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simplesimon
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by simplesimon »

If loan growth doesn't follow deposit growth, banks make less money. WSJ recently published a few articles about how banks are now flush with deposits from Federal stimulus and told readers not to expect any increase in savings rates.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by exodusNH »

HueyLD wrote: Thu Apr 07, 2022 9:30 am Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
Banks don't need deposits to make loans. Fractional reserve banking isn't how the modern US banking system works. If the bank isn't making loans, it's because there are no credit-worthy borrowers needing / willing to take loans at the current terms.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by scophreak »

exodusNH wrote: Thu Apr 07, 2022 9:45 am
HueyLD wrote: Thu Apr 07, 2022 9:30 am Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
Banks don't need deposits to make loans. Fractional reserve banking isn't how the modern US banking system works. If the bank isn't making loans, it's because there are no credit-worthy borrowers needing / willing to take loans at the current terms.
I don't believe this is accurate. Indeed, my understanding is that the US banking system DOES operate under a fractional reserve system. At least according to Investopedia:

"Banks with less than $16.3 million in assets are not required to hold reserves. Banks with assets of less than $124.2 million but more than $16.3 million have a 3% reserve requirement, and those banks with more than $124.2 million in assets have a 10% reserve requirement."
exodusNH
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by exodusNH »

scophreak wrote: Thu Apr 07, 2022 10:00 am
exodusNH wrote: Thu Apr 07, 2022 9:45 am
HueyLD wrote: Thu Apr 07, 2022 9:30 am Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
Banks don't need deposits to make loans. Fractional reserve banking isn't how the modern US banking system works. If the bank isn't making loans, it's because there are no credit-worthy borrowers needing / willing to take loans at the current terms.
I don't believe this is accurate. Indeed, my understanding is that the US banking system DOES operate under a fractional reserve system. At least according to Investopedia:

"Banks with less than $16.3 million in assets are not required to hold reserves. Banks with assets of less than $124.2 million but more than $16.3 million have a 3% reserve requirement, and those banks with more than $124.2 million in assets have a 10% reserve requirement."
They do not need deposits to make loans. There are risk management exercises banks need to perform, but fractional reserve banking / money multiplier effect is not how modern banking works.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by alex_686 »

Geologist wrote: Thu Apr 07, 2022 9:25 am I think alex_686 has one reasonable idea, but I don't really know why anyone on this discussion board would know why Ally (or any particular bank) would change or not change its rates. It's a corporate decision.
I will admit that I don't know anything about Ally per se. However, I have listened to a few earnings calls by other banks, read the sheets, have a decent idea of the cost structure of these things, etc. This is a common and recurring theme.
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MrJedi
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by MrJedi »

My understanding of the bank industry right now is that many banks are flush with deposits and demand for lending is somewhat depressed. Hence banks do not have strong needs to attract more deposits via higher interest on deposits.
alex_686
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by alex_686 »

exodusNH wrote: Thu Apr 07, 2022 10:18 am
scophreak wrote: Thu Apr 07, 2022 10:00 am
exodusNH wrote: Thu Apr 07, 2022 9:45 am
HueyLD wrote: Thu Apr 07, 2022 9:30 am Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
Banks don't need deposits to make loans. Fractional reserve banking isn't how the modern US banking system works. If the bank isn't making loans, it's because there are no credit-worthy borrowers needing / willing to take loans at the current terms.
I don't believe this is accurate. Indeed, my understanding is that the US banking system DOES operate under a fractional reserve system. At least according to Investopedia:

"Banks with less than $16.3 million in assets are not required to hold reserves. Banks with assets of less than $124.2 million but more than $16.3 million have a 3% reserve requirement, and those banks with more than $124.2 million in assets have a 10% reserve requirement."
They do not need deposits to make loans. There are risk management exercises banks need to perform, but fractional reserve banking / money multiplier effect is not how modern banking works.
All banks are required to hold reserves. Scophreak, could you please point to your link? There are multiple "reserve" standards so it would be helpful to know which of the many you are talking about.

Fractional reserve banking is still fundamental to the banking system. Securitization and Basel III have made the subject more complex and nuanced.

Lastly, banks are overstuffed with banks. Many of the big banks have gotten waivers to hold more cash than Federal Reserve's cap. They really have no need to raise interest rates to attract more cash.
Former brokerage operations & mutual fund accountant. I hate risk, which is why I study and embrace it.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Jack FFR1846 »

My online banks are Ally and Redneck. With Ally stuck at 0.5%, they've now been beaten by Redneck who has gone to 0.55%. Not a heck of a difference, but enough that I've started to transfer about a hundred grand over. And yes. I do pick up pennies from the grocery store parking lot. How do you think I got multiples of 2 commas in my portfolio?
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by RubyTuesday »

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H-Town
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by H-Town »

sapphire96 wrote: Thu Apr 07, 2022 9:16 am Hey everyone,

Does anyone know why Ally has not raised its rates since the Fed raised theirs? I remember during the rising interest period before COVID, Ally would raise their rates pretty much in lockstep with the Fed. More of a curiosity than anything else.
because it encourages people to do something better with their cash than 0.5% APY pre-tax interest income.
Time is the ultimate currency.
TechByron
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by TechByron »

alex_686 wrote: Thu Apr 07, 2022 10:35 am
exodusNH wrote: Thu Apr 07, 2022 10:18 am
scophreak wrote: Thu Apr 07, 2022 10:00 am
exodusNH wrote: Thu Apr 07, 2022 9:45 am
HueyLD wrote: Thu Apr 07, 2022 9:30 am Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
Banks don't need deposits to make loans. Fractional reserve banking isn't how the modern US banking system works. If the bank isn't making loans, it's because there are no credit-worthy borrowers needing / willing to take loans at the current terms.
I don't believe this is accurate. Indeed, my understanding is that the US banking system DOES operate under a fractional reserve system. At least according to Investopedia:

"Banks with less than $16.3 million in assets are not required to hold reserves. Banks with assets of less than $124.2 million but more than $16.3 million have a 3% reserve requirement, and those banks with more than $124.2 million in assets have a 10% reserve requirement."
They do not need deposits to make loans. There are risk management exercises banks need to perform, but fractional reserve banking / money multiplier effect is not how modern banking works.
All banks are required to hold reserves. Scophreak, could you please point to your link? There are multiple "reserve" standards so it would be helpful to know which of the many you are talking about.

Fractional reserve banking is still fundamental to the banking system. Securitization and Basel III have made the subject more complex and nuanced.

Lastly, banks are overstuffed with banks. Many of the big banks have gotten waivers to hold more cash than Federal Reserve's cap. They really have no need to raise interest rates to attract more cash.
Reserves are needed for inter bank settlements, not loans. Loans are made due to risk/reward calculus done by the bank and then reserves are found if needed. The Fed itself has admitted the money multiplier concept is outdated and wrong as well as the Bank of England:

https://research.stlouisfed.org/publica ... multiplier
https://www.bankofengland.co.uk/quarter ... rn-economy
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by scophreak »

alex_686 wrote: Thu Apr 07, 2022 10:35 am
exodusNH wrote: Thu Apr 07, 2022 10:18 am
scophreak wrote: Thu Apr 07, 2022 10:00 am
exodusNH wrote: Thu Apr 07, 2022 9:45 am
HueyLD wrote: Thu Apr 07, 2022 9:30 am Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
Banks don't need deposits to make loans. Fractional reserve banking isn't how the modern US banking system works. If the bank isn't making loans, it's because there are no credit-worthy borrowers needing / willing to take loans at the current terms.
I don't believe this is accurate. Indeed, my understanding is that the US banking system DOES operate under a fractional reserve system. At least according to Investopedia:

"Banks with less than $16.3 million in assets are not required to hold reserves. Banks with assets of less than $124.2 million but more than $16.3 million have a 3% reserve requirement, and those banks with more than $124.2 million in assets have a 10% reserve requirement."
They do not need deposits to make loans. There are risk management exercises banks need to perform, but fractional reserve banking / money multiplier effect is not how modern banking works.
All banks are required to hold reserves. Scophreak, could you please point to your link? There are multiple "reserve" standards so it would be helpful to know which of the many you are talking about.

Fractional reserve banking is still fundamental to the banking system. Securitization and Basel III have made the subject more complex and nuanced.

Lastly, banks are overstuffed with banks. Many of the big banks have gotten waivers to hold more cash than Federal Reserve's cap. They really have no need to raise interest rates to attract more cash.
To answer a specific request, here is the Investopedia article that was referenced:https://www.investopedia.com/terms/f/fr ... anking.asp

Beyond that, I was simply responding to the statement that "Fractional reserve banking isn't how the modern US banking system works". I believe that the linked article and any number of other sources would directly refute that claim. I don't want to get into further debate on the point as it's not particularly relevant to OP's question.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by learningLady »

We have always used synchrony and currently it is at .6
UpperNwGuy
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by UpperNwGuy »

PenFed just raised their online savings rate today. The new rate is 0.6%. They also bumped up their certificate rates.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by ychuck46 »

Chuck wrote: Thu Apr 07, 2022 9:27 am Because they don't have to?
As good a reason as anything.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by LadyGeek »

The discussion is getting derailed on fractional banking. Please stay on-topic, which is:
sapphire96 wrote: Thu Apr 07, 2022 9:16 am Hey everyone,

Does anyone know why Ally has not raised its rates since the Fed raised theirs? I remember during the rising interest period before COVID, Ally would raise their rates pretty much in lockstep with the Fed. More of a curiosity than anything else.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by runner23 »

I haven’t seen Sofi mentioned I don’t think. I switched from ally to sofi. Sofi is at 1.25%.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by tibbitts »

Jack FFR1846 wrote: Thu Apr 07, 2022 10:40 am How do you think I got multiples of 2 commas in my portfolio?
Definitely not by picking up pennies or by moving savings around for .05% increases in rates. Lots of us have done the same as hobby activities, sort of the Boglehead version of watching cat videos, but they have no financial significance.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by zeep »

When we all move to Treasuries. I'm starting to.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by anon_investor »

zeep wrote: Thu Apr 07, 2022 4:38 pm When we all move to Treasuries. I'm starting to.
Which ones you buying? 6mo?
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Tom_T »

runner23 wrote: Thu Apr 07, 2022 3:58 pm I haven’t seen Sofi mentioned I don’t think. I switched from ally to sofi. Sofi is at 1.25%.
Only with direct deposit. Otherwise, 0.70%.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by boglefannyc »

I've started buying some 6 mo. treasuries. The last auction was 1.11%
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by 000 »

It doesn't matter as rates will soon be headed back downward for this year.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by angelescrest »

runner23 wrote: Thu Apr 07, 2022 3:58 pm I haven’t seen Sofi mentioned I don’t think. I switched from ally to sofi. Sofi is at 1.25%.
Hmm, I’m fairly new with Ally. This is way better. How do you like them compared to Ally?
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by mervinj7 »

boglefannyc wrote: Thu Apr 07, 2022 5:08 pm I've started buying some 6 mo. treasuries. The last auction was 1.11%
+1 switching short term savings to six month treasuries.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Marseille07 »

Give them some time. After the May hike, I'm sure Ally will start bumping rates.
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averagedude
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by averagedude »

Because they don't want too and they don't have too. Give it time though, as long as we don't go into recession and the federal fund rate keeps going higher, they will be offering higher rates in the future.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by obafgkm »

alex_686 wrote: Thu Apr 07, 2022 10:35 am Lastly, banks are overstuffed with banks.
Maybe the banks should stop buying other banks? :mrgreen: :P
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Marseille07 »

averagedude wrote: Thu Apr 07, 2022 9:26 pm Because they don't want too and they don't have too. Give it time though, as long as we don't go into recession and the federal fund rate keeps going higher, they will be offering higher rates in the future.
They need to stay competitive or start losing customers. That said, they don't immediately track the FF rate.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Spiderv6 »

Jack FFR1846 wrote: Thu Apr 07, 2022 10:40 am My online banks are Ally and Redneck. With Ally stuck at 0.5%, they've now been beaten by Redneck who has gone to 0.55%. Not a heck of a difference, but enough that I've started to transfer about a hundred grand over. And yes. I do pick up pennies from the grocery store parking lot. How do you think I got multiples of 2 commas in my portfolio?
Multiples of 2? So that’s at least 6.

You have at least 1,000,000,000,000,000,000 in your portfolio?

Count me impressed.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by secondopinion »

mervinj7 wrote: Thu Apr 07, 2022 8:52 pm
boglefannyc wrote: Thu Apr 07, 2022 5:08 pm I've started buying some 6 mo. treasuries. The last auction was 1.11%
+1 switching short term savings to six month treasuries.
Holding tight to my open-ended CD at 3% maturing in about two years.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by alex_686 »

Marseille07 wrote: Thu Apr 07, 2022 9:36 pm
averagedude wrote: Thu Apr 07, 2022 9:26 pm Because they don't want too and they don't have too. Give it time though, as long as we don't go into recession and the federal fund rate keeps going higher, they will be offering higher rates in the future.
They need to stay competitive or start losing customers. That said, they don't immediately track the FF rate.
To stay competitive they need to reduce the excess cash on their balance sheets that they can’t deploy. It is a expense that they can’t profit from. More than one bank has “fired” big clients in the past 12 months.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by runner23 »

angelescrest wrote: Thu Apr 07, 2022 8:43 pm
runner23 wrote: Thu Apr 07, 2022 3:58 pm I haven’t seen Sofi mentioned I don’t think. I switched from ally to sofi. Sofi is at 1.25%.
Hmm, I’m fairly new with Ally. This is way better. How do you like them compared to Ally?
It’s a nice interface. They cater to the HENRYS’s. High income not yet rich crowd. They also have a credit card that is 2% cash back on everything which is not bad.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by z3r0c00l »

Just got an email that savings rate is going up from .5 to .6%.
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sowhatsnext
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by sowhatsnext »

z3r0c00l wrote: Wed May 11, 2022 6:56 pm Just got an email that savings rate is going up from .5 to .6%.
Also... ALLY is offering a Special 20-month CD at 1.75% until July 31, 2022
https://www.ally.com/go/bank/20m-select-cd/
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by 02nz »

sowhatsnext wrote: Wed May 11, 2022 8:17 pm
z3r0c00l wrote: Wed May 11, 2022 6:56 pm Just got an email that savings rate is going up from .5 to .6%.
Also... ALLY is offering a Special 20-month CD at 1.75% until July 31, 2022
https://www.ally.com/go/bank/20m-select-cd/
Or you could get around 3% on a 2-year brokered CD. Those have some disadvantages, but not nearly enough to outweigh the difference in yield IMHO. Actually the best rate I'm seeing right now (on E*Trade) is from none other than Ally - at 2.95%.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by MikeG62 »

sowhatsnext wrote: Wed May 11, 2022 8:17 pm
z3r0c00l wrote: Wed May 11, 2022 6:56 pm Just got an email that savings rate is going up from .5 to .6%.
Also... ALLY is offering a Special 20-month CD at 1.75% until July 31, 2022
https://www.ally.com/go/bank/20m-select-cd/
Last I checked you could get ~2% in a 12-month treasury.
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by z3r0c00l »

sowhatsnext wrote: Wed May 11, 2022 8:17 pm
z3r0c00l wrote: Wed May 11, 2022 6:56 pm Just got an email that savings rate is going up from .5 to .6%.
Also... ALLY is offering a Special 20-month CD at 1.75% until July 31, 2022
https://www.ally.com/go/bank/20m-select-cd/
For longer term commitments I prefer a 3 year bond mutual fund offering 2.8% but one must keep some cash somewhere, if only to pay bills and save up enough to buy bonds/stocks in meaningful amounts. Keep ~1500 in a checking account and a few thousand more at Ally.
70% Global Stocks / 25% Bonds / 5% cash
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by MBB_Boy »

exodusNH wrote: Thu Apr 07, 2022 9:45 am
HueyLD wrote: Thu Apr 07, 2022 9:30 am Ally hasn’t increased its savings account rate because its loan demand may still be sluggish. When and if Ally needs funds, management will do what it takes to get money

In the meantime, a customer is free to take the money elsewhere.
Banks don't need deposits to make loans. Fractional reserve banking isn't how the modern US banking system works. If the bank isn't making loans, it's because there are no credit-worthy borrowers needing / willing to take loans at the current terms.
This (mostly). There is still cost of funds to consider, which influence the terms that they can offer to potentially credit-worthy borrowers
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by MBB_Boy »

Jack FFR1846 wrote: Thu Apr 07, 2022 10:40 am My online banks are Ally and Redneck. With Ally stuck at 0.5%, they've now been beaten by Redneck who has gone to 0.55%. Not a heck of a difference, but enough that I've started to transfer about a hundred grand over. And yes. I do pick up pennies from the grocery store parking lot. How do you think I got multiples of 2 commas in my portfolio?
SoFi is 1.25% with direct deposit, 0.7% without
MichDad
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by MichDad »

For federal government employees and retirees, the current yield on the Thrift Savings Plan's G Fund is 3.0%, and it's been trending higher each of the past few months.

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Re: Why hasn’t Ally raised its Online Savings Rates

Post by SquawkIdent »

MichDad wrote: Fri May 13, 2022 2:52 am For federal government employees and retirees, the current yield on the Thrift Savings Plan's G Fund is 3.0%, and it's been trending higher each of the past few months.

MichDad
Nice.

On the other hand, they’ve taken much criticism lately for their upcoming shutdown, due to the plan “updates”.

Thoughts?
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by Eno Deb »

sowhatsnext wrote: Wed May 11, 2022 8:17 pmAlso... ALLY is offering a Special 20-month CD at 1.75% until July 31, 2022
https://www.ally.com/go/bank/20m-select-cd/
Looks like they have already bumped it to 2%. Still not very compelling compared to 1-2 year treasuries.
secondopinion
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Re: Why hasn’t Ally raised its Online Savings Rates

Post by secondopinion »

Eno Deb wrote: Fri May 13, 2022 12:21 pm
sowhatsnext wrote: Wed May 11, 2022 8:17 pmAlso... ALLY is offering a Special 20-month CD at 1.75% until July 31, 2022
https://www.ally.com/go/bank/20m-select-cd/
Looks like they have already bumped it to 2%. Still not very compelling compared to 1-2 year treasuries.
And with no real liquidity here, I rather get treasuries at the moment.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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