As anticipated, I just got an email from Ally Bank announcing their savings interest rate will dropping from 1% to 0.8% effective 8/14/2020...
Adding relevant text from the email:
"...we want to let you know that the Annual Percentage Yield (APY) for your Online Savings Account is changing from 1.00% APY to 0.80% APY on all balance tiers. Your new APY is effective 8/14/2020 and will show online in your account details on 8/15/2020. While the COVID-19 pandemic continues to drastically impact the global economy, rates throughout the financial industry continue to decline. To learn more about why interest rates fluctuate, check out the five things you should know about changing rates and what you can do to grow your savings in any economic climate."
MJPK1988 wrote: ↑Thu Aug 13, 2020 12:35 pm
I’m surprised it took them this long. Ally usually drops their rates long before other online banks do.
I noticed that lately Ally has been quietly dropping the NP CD rate first, then announcing the HYS rate drop.
Quietly? They notify Savings account holders what their new interest rate is (via email). They also notify prospective future NP CD buyers by posting the new rate on their website since they apparently haven’t developed sufficiently capable AI to know who future CD buyers are. I sure wouldn’t want to get an email every time one of their CD rates changes just because I am an Ally customer
[Thread merged into here, see below. --admin LadyGeek]
just got an email from Ally:
we want to let you know that the Annual Percentage Yield (APY) for your Online Savings Account is changing from 1.00% APY to 0.80% APY on all balance tiers. Your new APY is effective 8/14/2020 and will show online in your account details on 8/15/2020. While the COVID-19 pandemic continues to drastically impact the global economy, rates throughout the financial industry continue to decline. To learn more about why interest rates fluctuate, check out the five things you should know about changing rates and what you can do to grow your savings in any economic climate...
MJPK1988 wrote: ↑Thu Aug 13, 2020 12:35 pm
I’m surprised it took them this long. Ally usually drops their rates long before other online banks do.
I noticed that lately Ally has been quietly dropping the NP CD rate first, then announcing the HYS rate drop.
Quietly? They notify Savings account holders what their new interest rate is (via email). They also notify prospective future NP CD buyers by posting the new rate on their website since they apparently haven’t developed sufficiently capable AI to know who future CD buyers are. I sure wouldn’t want to get an email every time one of their CD rates changes just because I am an Ally customer
Have credit cards, iBonds and post-tax investing if it hits the fan with a lower EF.
Just got the email myself and came here to see if there was a post already, and here it is!
Ally's no-penalty CD rate is currently 0.75%, which to me means savings rates will likely drop further. I opened a few no penalty CDs at 0.95% last month despite the savings rate still being at 1.00%. I'll enjoy earning a couple more dollars over the CDs term than if I had stood pat!
runner3081 wrote: ↑Thu Aug 13, 2020 12:40 pm
I noticed that lately Ally has been quietly dropping the NP CD rate first, then announcing the HYS rate drop.
Quietly? They notify Savings account holders what their new interest rate is (via email). They also notify prospective future NP CD buyers by posting the new rate on their website since they apparently haven’t developed sufficiently capable AI to know who future CD buyers are. I sure wouldn’t want to get an email every time one of their CD rates changes just because I am an Ally customer
But if they lowered the savings rate first and notified account holders then people could go to Ally and move funds into a NP CD before its rate changed. It was sequenced this way in the past. It seems they've decided to reverse the sequence, likely to prevent people from easily doing just that.
MJPK1988 wrote: ↑Thu Aug 13, 2020 12:35 pm
I’m surprised it took them this long. Ally usually drops their rates long before other online banks do.
I noticed that lately Ally has been quietly dropping the NP CD rate first, then announcing the HYS rate drop.
Quietly? They notify Savings account holders what their new interest rate is (via email). They also notify prospective future NP CD buyers by posting the new rate on their website since they apparently haven’t developed sufficiently capable AI to know who future CD buyers are. I sure wouldn’t want to get an email every time one of their CD rates changes just because I am an Ally customer
Have credit cards, iBonds and post-tax investing if it hits the fan with a lower EF.
Sounds like you don't need an emergency fund. I don't necessarily disagree with you. When one has enough wealth, their wealth is their emergency fund.
A time to EVALUATE your jitters: |
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=79939&start=400#p5275418
MJPK1988 wrote: ↑Thu Aug 13, 2020 12:35 pm
I’m surprised it took them this long. Ally usually drops their rates long before other online banks do.
I noticed that lately Ally has been quietly dropping the NP CD rate first, then announcing the HYS rate drop.
Quietly? They notify Savings account holders what their new interest rate is (via email). They also notify prospective future NP CD buyers by posting the new rate on their website since they apparently haven’t developed sufficiently capable AI to know who future CD buyers are. I sure wouldn’t want to get an email every time one of their CD rates changes just because I am an Ally customer
Barclays does it quietly...no notification to account holders at all.
but I stay with them because of super fast ACH transfers.
MJPK1988 wrote: ↑Thu Aug 13, 2020 12:35 pm
I’m surprised it took them this long. Ally usually drops their rates long before other online banks do.
I noticed that lately Ally has been quietly dropping the NP CD rate first, then announcing the HYS rate drop.
Quietly? They notify Savings account holders what their new interest rate is (via email). They also notify prospective future NP CD buyers by posting the new rate on their website since they apparently haven’t developed sufficiently capable AI to know who future CD buyers are. I sure wouldn’t want to get an email every time one of their CD rates changes just because I am an Ally customer
Have credit cards, iBonds and post-tax investing if it hits the fan with a lower EF.
I would say if you're comfortable with that now you would have been at 1.5% or 2% interest rates as well, so I'm not seeing a reason to change now.
I usually like to save enough cash through the year to max Roth IRAs and 529s ($4k x 2 state deduction max) on January 1st, but we're sitting at $7500 at ALLY and I just scheduled to have our excess bi-weekly income automated to buy VTSAX. <1% is just too low for me to have more than 3 months expenses just sitting there.
runner3081 wrote: ↑Thu Aug 13, 2020 12:40 pm
I noticed that lately Ally has been quietly dropping the NP CD rate first, then announcing the HYS rate drop.
Quietly? They notify Savings account holders what their new interest rate is (via email). They also notify prospective future NP CD buyers by posting the new rate on their website since they apparently haven’t developed sufficiently capable AI to know who future CD buyers are. I sure wouldn’t want to get an email every time one of their CD rates changes just because I am an Ally customer
But if they lowered the savings rate first and notified account holders then people could go to Ally and move funds into a NP CD before its rate changed. It was sequenced this way in the past. It seems they've decided to reverse the sequence, likely to prevent people from easily doing just that.
Earlier in the year when they announced HYS rate drops, they actually recommended in those emails to put money into CDs. Like in the email in March, it said:
"Set aside a portion of your savings in one of our CDs to lock in a rate that you can count on."
The one I’ve noticed to watch is Discover online savings, they’re typically the first to drop with everyone following within a day. On their earnings call they predicted additional downward pressure back when rates were at 1%. With over $100B of credit card debt being paid off banks are probably looking for easy savings elsewhere.
There are far better things to do than chase/fret over 1% or less interest rates in my opinion. Everything has an opportunity cost.
Throw some in Weathfront, start an Acorns account and/or do something else "exciting". My small "canary in a coal mine" Wealthfront full robo (no fee up to $5k) account is at its all time high in ~2.5 years right now.
If you want to get 1%, take a look at presidential.com
Due to lower Ally APY, I moved $10k to The Fidelity Government Money Market Fund SPAXX in my taxable brokerage recently. It's just sitting in this core position, but I'm tempted to invest in the market soon. I still have >$20k in emergency funds spread between Ally and other banks, which still kinda seems like a lot of money not being invested in my taxable brokerage right now.
grobertj wrote: ↑Thu Aug 13, 2020 6:32 pm
With bond yields so low, does it make sense to increase your Cash Reserve and move your bond holdings into a Stock Fund? Just a thought.
To me this artificially inflates the market. People with fewer savings options will be more likely to invest. I am already hearing that kind of chatter at work from armchair day traders.
grobertj wrote: ↑Thu Aug 13, 2020 6:32 pm
With bond yields so low, does it make sense to increase your Cash Reserve and move your bond holdings into a Stock Fund? Just a thought.
To me this artificially inflates the market. People with fewer savings options will be more likely to invest. I am already hearing that kind of chatter at work from armchair day traders.
That's basically the plan. Keeps rates so low for so long that you artificially inflate the stock market. News loves to hype an inflated market, middle class think that means things are going well, and at the end of the day the rich get richer and the poor get poorer.
grobertj wrote: ↑Thu Aug 13, 2020 6:32 pm
With bond yields so low, does it make sense to increase your Cash Reserve and move your bond holdings into a Stock Fund? Just a thought.
To me this artificially inflates the market. People with fewer savings options will be more likely to invest. I am already hearing that kind of chatter at work from armchair day traders.
That's basically the plan. Keeps rates so low for so long that you artificially inflate the stock market. News loves to hype an inflated market, middle class think that means things are going well, and at the end of the day the rich get richer and the poor get poorer.
I think this is a perfect time to be fearful when others are greedy. Not saying time the market or change plans, but I do think it's wise to maintain (or even grow) an emergency fund instead of plowing into riskier assets. So much uncertainty.
CycloRista wrote: ↑Thu Aug 13, 2020 5:16 pm
There are far better things to do than chase/fret over 1% or less interest rates in my opinion. Everything has an opportunity cost.
Throw some in Weathfront, start an Acorns account and/or do something else "exciting". My small "canary in a coal mine" Wealthfront full robo (no fee up to $5k) account is at its all time high in ~2.5 years right now.
If you want to get 1%, take a look at presidential.com
If you want something exciting go for Ethereum or get into some DeFi project.
grobertj wrote: ↑Thu Aug 13, 2020 6:32 pm
With bond yields so low, does it make sense to increase your Cash Reserve and move your bond holdings into a Stock Fund? Just a thought.
To me this artificially inflates the market. People with fewer savings options will be more likely to invest. I am already hearing that kind of chatter at work from armchair day traders.
That's basically the plan. Keeps rates so low for so long that you artificially inflate the stock market. News loves to hype an inflated market, middle class think that means things are going well, and at the end of the day the rich get richer and the poor get poorer.
Agree trillions if dollars of stimulus pay the population toilet paper to distract them from the bigger wealth transfers at play.
Due to lower Ally APY, I moved $10k to The Fidelity Government Money Market Fund SPAXX in my taxable brokerage recently. It's just sitting in this core position, but I'm tempted to invest in the market soon. I still have >$20k in emergency funds spread between Ally and other banks, which still kinda seems like a lot of money not being invested in my taxable brokerage right now.
Why? SPAXX pays way less than Ally even after Ally drops to 0.8%?
My EF is in Ally. It will stay there. It is doing just exactly what I have asked it to do: Stay safe and not become smaller. It has done that. Do I wish I was getting the 1.9% interest I was a year ago? Of course I do, but returns has never been the purpose of my EF. I have other funds for that. I will, as always, carry on.
I believe this roughly equals the low yield paid by Ally on their online savings account during the financial crisis. While I hope we've hit bottom, I am sadly not so sure rates are done dropping.
It appears that Marcus is still offering their AARP special 8-month no-penalty CD at 1.10%. Although I am not a fan of AARP, anyone can join AARP for as little as $12 the first year. One only needs to invest $6,000 (over the 8-month term) to offset the $12 membership fee assuming a yield pickup of 30bps. Also AARP membership also provides a 10bp bump on the Marcus online savings rate for 24 months.
Ive been sitting on some cash in Ally, paying off 0% financed debt for some work we had done every month, figuring why pay it off early when I can at least get some interest on my savings, and its sitting there safe. Now with a few months left, and this drop to .08%, Im wondering if I just pay it off now, since it will amount to a difference of probably $25 bucks if I dont.
UpperNwGuy wrote: ↑Fri Aug 14, 2020 5:16 am
I’m astonished at all these comments. We’ve known for months that this would happen. Why is everyone so surprised?
Exactly, and yet we have the (essentially) same thread after every incremental drop
MikeG62 wrote: ↑Fri Aug 14, 2020 6:31 am
I believe this roughly equals the low yield paid by Ally on their online savings account during the financial crisis. While I hope we've hit bottom, I am sadly not so sure rates are done dropping.
According to Kevin M, who you may know is meticulous in monitoring APY, the lowest the Ally savings rate dropped to was .84 during the Great Recession.
UpperNwGuy wrote: ↑Fri Aug 14, 2020 5:16 am
I’m astonished at all these comments. We’ve known for months that this would happen. Why is everyone so surprised?
In order to put the skids on part of my PMMF (0.15% SECY!) yield I stuck a bunch of it in NFCU 18 month CD with 1.15% APY. Not a killer yield, but beats what PMMF is paying.
Part-Owner of Texas |
|
“The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle
grobertj wrote: ↑Thu Aug 13, 2020 6:32 pm
With bond yields so low, does it make sense to increase your Cash Reserve and move your bond holdings into a Stock Fund? Just a thought.
To me this artificially inflates the market. People with fewer savings options will be more likely to invest. I am already hearing that kind of chatter at work from armchair day traders.
That's basically the plan. Keeps rates so low for so long that you artificially inflate the stock market. News loves to hype an inflated market, middle class think that means things are going well, and at the end of the day the rich get richer and the poor get poorer.
Ditto. We can see real-time the Poor getting poorer, but how much richer can the really Rich get?
I've got 2yr of EF at 2% rolls in Feb an 1yr EF spread over 12,18,24 month CDs at around 1.1%
Last edited by VanGuppy on Fri Aug 14, 2020 1:13 pm, edited 1 time in total.
