No one likes opening a checking or savings account only to watch the interest rate drop. The same is true when opening a longer term certificate of deposit (CD). Interest rates can fluctuate between the time you open a CD and the time you fund it.
Ally Bank has attracted customers to its CDs by offering a unique guarantee that helps ease customers’ worries about missing out on increased interest rates. They call it the 10-Day Best Rate Guarantee.
I’ll explain what exactly this guarantee provides CD customers and how it fits into the three CDs offered by Ally Bank.
What is the 10-Day Rate Guarantee?
All of Ally Bank’s CDs, which currently offer some of the best CD rates available, also come with a Ten Day Rate Guarantee.
The guarantee says that if you open a CD account and fund it within 10 days, you will get the best rate over that 10-day period.
Let’s say you open and fund an account that gives you a 1.25% interest rate. Nine days later, the interest rate increases to 1.30%. Your CD gets the 1.30% rate. You can see how this type of guarantee can appeal to a customer who is in the market for a CD, but is worried about the interest rate improving right after they open an account.
The Ten Day Rate Guarantee does not kick in until you actually fund the account. However, the ten day window begins when you open the account.
That means if you open an account on day 1 and wait until day 9 to fund the account, you will only get the best rate offered on day 9 and day 10. To take full advantage of this program, open and fund the CD on the same day.
In order to maximize your chance of receiving the best interest rate in the ten day window, some financial writers suggest opening the CD on a Wednesday or Thursday.
Ally Bank tends to change its rates on Fridays so if you open your account on Wednesday or Thursday, two Fridays will pass during that guarantee window. This gives you two opportunities to see increased interest rates.
Which Ally Bank CD is best for you?
Ally Bank offers three different CDs. They all come with the Ten Day Best Rate Guarantee. They also require no minimum deposit and charge no fees to open or maintain a CD.
Despite requiring no minimum deposit, Ally Bank’s interest rates tend to be better than those offered by more prominent banks like Wells Fargo, Bank of America, Chase, ING, and HSBC Direct.
- The “High Yield CD” provides flexibility with the CD’s term length. Customers can choose a term length as short as 3 months or as long as 5 years. The rates improve as the term length increases. The 1 year CD offers a 0.99% APY (as of 1/17/2012). If you choose to withdraw your money early, you pay a fee equal to 60 days’ interest. This is a relatively mild penalty in the CD world. It is not uncommon for customers to pay an early withdrawal penalty of three months’ interest, or six months’ interest for CDs with terms that exceed 2 years.
- Ally Bank’s “No Penalty CD” is an excellent choice for customers who might want to withdraw their money before a CD’s maturity date. This CD charges no penalty for withdrawal after the first six days of funding your CD. The term length is only 11 months and current APY is 0.91% (as of 1/17/2012).
- The “Raise Your Rate CD” comes with an interesting option that allows customers to raise their interest rate once during the CD’s two year term. This one-time rate increase does not receive the Ten Day Best Rate Guarantee. The CD comes with a relatively high 1.18% APY (as of 1/17/2012). The early withdrawal fee is 60 days’ interest.
If you are in the market for a CD, think about what options you prefer, and be sure to take a serious look at what Ally Bank offers.