Ally Bank Offers ‘Raise Your Rate’ 2-Year CD

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Ally Bank has introduced some pretty unique features to what are otherwise boring certificates of deposit. We’ve written before about its no-penalty CD with a 9-month term. As the name suggests, Ally Bank’s no-penalty CD lets you can withdrawal the money before the CD matures without incurring a penalty. Well, recently Ally introduced another innovative feature to its line of CDs called the “Raise Your Rate” CD.

The idea behind a rising rate CD is really ingenious. The CD has a 2-year term, and like most CDs, you will be charged a penalty if you withdrawal your money early. Because it is a fairly long CD, you get a higher rate than short-term CDs. The problem with long-term CDs, however, is that it locks you in at a certain interest rate. That can be particularly troubling now when most see interest rates rising over the next couple of years. Who wants to lock in at say 2% on a CD that will be paying 3%, 4%, or even more a year from now?

With Ally Bank’s Raise Your Rate CD, you get the option of raising your rate once anytime during the 2-year term. If rates go up, you can take advantage of the rising rates. Here are the details:

  • Open with $0
  • No monthly fees
  • Extra peace of mind with Ally’s Ten Day Best Rate Guarantee
  • Daily compound interest for maximum earnings
  • FDIC insured. Maximize your coverage
  • Automatic renewal at maturity
  • Ability to withdraw and receive earned interest as income—just let us know within ten days after your CD matures

The Rising Rate CD also benefits from Ally’s 10-Day Rate Guarantee. If you open an account and fund it within 10 days, Ally Bank will give you the best rate over that 10-day period. It’s a great way to avoid opening an account and watching the interest rate go up the next day. All of Ally Bank’s CDs offer the 10-Day Rate Guarantee. Here are the details:

Absolutely. All Ally CDs come with the Ten Day Best Rate Guarantee. When you fund your CD within ten days of opening or when your Ally CD renews, you automatically get the best rate we offer during those ten days. With our Raise Your Rate CD, you get the option of a one-time rate increase any time during your 2 year term. It’s just one more way we’re making sure your money works hard and earns more.

Published or Updated: July 31, 2014
About Rob Berger

Rob founded the Dough Roller in 2007. A litigation attorney in the securities industry, he lives in Northern Virginia with his wife, their two teenagers, and the family mascot, a shih tzu named Sophie.

Comments

  1. MNuss says:

    Have we ever heard of ‘betting on the come’? I suggest you Google it… Essentially I’m asking you how lucky you think you are and do you really want to depend, at least in part, on an element of luck for your maximizing your return on a short term liquidity position?

    Today, in the age of a growing FDIC institution watch list, I find it interesting (if not laughable) that we’re back to the old game of trying to create the ‘innovative products’ to grow the deposit bases with what appears to be little consideration for the underlying customer or what tools they should have to make the best decision in considering products like this. I do have to say that I am more than impressed with how Ally (see GMAC Bank: http://blogs.wsj.com/deals/2009/05/15/bye-bye-gmac-will-ally-bank-work-or-not/tab/article/) has devised a marketing campaign to effectively sweep the reputation the former GMAC Bank created for itself under the rug with a welcoming name and brand identy, along with fresh ‘innovative’ products.

    However I’m hopeful that, today, as better informed consumers we ask the hard questions and consider our financial decisions with an eye on tommorrow before biting on the lures dangling in front of us.

    In the interest of full disclosure, I do prefer to use ‘vanilla’ financial products that I understand and outlines all the costs and fine print.

    With regard to this and products like this, I’d ask one to consider: “What are you willing to wager?” There is no place for rates to go but up, right? The question is, how high and how soon will rates rise – and when do you want to pull the trigger? With a one-time adjustment, you can certainly rest assured that you will get a bit more rate on a CD, however, there is probably going to be a lag between when rates move and when you decide to adjust (see: opportunity cost). Also, I am going to guess that rates will continue to rise for some period after one’s decision to adjust the rate one time. It’s also important to remember the horizon is two years so waiting too long in a rising rate environment is certainly not in your best interest.

    The ideal scenario would be to buy the CD at a nice rate today (as advertised) with one major jump in rates tomorrow and no further material changes for the next 1 year and 364 days. If this happend, you readjust and reap the benefits of compounding interest.

    Unfortunately, I doubt it will happen this way and, therefore, one must balance what their real expectations are for the implied time horizon, in this case two years. Do we know what the rate is tied to? Is it a fixed rate that was pulled out of thin air or is it based on the two year treasury rate? Also, if it’s tied to a treasury will the margin over the two year treasury be the same when you adjust? All important things to consider.

    There is a time value of money implications as well as an opportunity costs that one should evaluate before ‘chasing the rate’. Make sure you ASK QUESTIONS when you see an advertised rate that materially exceeds market rates and before you lock a portion of your liquidity into any long term instrument, make sure you understand the underlying implications and consider whether the product fits your needs.

    • DR says:

      It’s interesting to me how some react to the fact that Ally Bank use to be GMAC. To me, Ally is an FDIC-insured bank with very competitive interest rates on an innovative collection of financial products. It’s website is easy to use and there aren’t large minimum deposits required. While there are certainly other competitive options, for the life of me I can’t figure out why one would avoid Ally because it use to be GMAC.

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