Perhaps the biggest drawback to a certificate of deposit is that you have to lock your money away for the term of the CD. While you can withdraw your deposit early, with most CDs you get hit with a penalty equal to several months worth of interest. Recognizing this drawback, several banks have encouraging new customers to open a CD by offering what they call a no-penalty CD.
We’ve reviewed the Discover no penalty CD in the past, which let’s you withdraw your money if you lose your job. While a CD that cuts you a break if you lose your job is a nice feature, one that let’s you withdraw your money penalty-free at any time would be even better. And that brings us to the Ally Bank 11-month no penalty CD, which lets you take out your money for any reason at all penalty free.
In that sense, the Ally Bank high yield CD is a true no-penalty certificate of deposit. But here’s the crazy thing – Ally Bank’s rate for its no penalty CD is actually higher than what it offers for its regular 11-month CD. Now the difference isn’t a lot (as of today the no-penalty option is 4 basis points higher than the traditional CD), but why not go for the higher rate and the flexibility to be able to withdraw your money whenever you want?
There’s no question in my mind that the Ally Bank offer is the best no penalty option available today. It beats the rates offered by Discover Bank’s regular CD with a comparable term. But the real question is whether you chose the Ally Bank’s 12-month CD, which does charge early withdrawal fees, over the 11-month CD the doesn’t charge a penalty. The reason is that Ally Bank’s 12-month rate is currently 20 basis points above the rate for its 11-month no penalty CD. That’s a pretty wide margin given the low interest rates today. Either way, you can check out current rates for all of Ally Bank’s CDs by clicking here.
And for those that are going to deposit at least $1,500, there’s another alternative – the EverBank Online Savings Account. EverBank currently has an online savings account that is offering a great rate for any account balance. That’s hard to beat in this down economy and the money can be withdrawn any time without penalty.
Published or updated April 6, 2013.