Ally Bank, Formerly GMAC Bank, Has Good Rates
The first time when I looked at GMAC Bank was December 2006, when I was researching for a new savings account to replace those accounts, such as ING Direct, HSBC Direct, and Emigrant Direct, that have lost their competitive edge during the time when online banking became increasingly popular. Though I eventually selected IGoBanking over other candidates, I gave GMAC Bank some serious thought because its rate was quite good at that time.
Now, two and a half years later, things have changed a lot in both the auto and banking industry. GM, GMAC’s parent and the once world’s largest auto maker, is on verge to file Chapter 11, despite billions of dollars capital injection. At the same time, GMAC Bank, after being approved by the Fed as a bank holding company last December, has also received billions of bailout money from the government to stay afloat. While GM is fighting for its life, GMAC seems ready to turn the page and make a fresh new start. Two weeks ago, the bank officially changed its name to Ally Bank , a move seen as to disassociate itself from its trouble parent (Ally Bank is still part of the GMAC family of companies though). Changing the name helps smooth the bank’s image and attract more deposits, but what really counts isn’t the new name. Rather it’s the bank’s products, including high-yield online savings account, money market account, and CD. If I first went to the new Ally Bank website, I was quite impressed by the bank pledges that all its banking products require no minimum deposit, no minimum balance and charges no monthly fee.
Online Savings Account
Ally Bank’s Online Savings Account doesn’t have the highest yield, but the rate is every competitive . If you take a look at the history of online bank interest rates, you will see that Ally Bank Savings Account is one of the best available right now (the highest among big banks), despite the bank’s not-s0-healthy balance sheet. The bank has been keeping its rate relatively steady so far this year when compared with other popular banks such as Dollar Savings Direct, FNBO Direct, and HSBC Direct, which all have their rates cut well below 2.0%. Other information of the online savings account and Ally Bank include:
- Free online banking;
- Daily compounded interests;
- FDIC insurance up to the maximum amount allowed by law (current limit is $250K, good till 2013);
- Ally Bank routing number 124003116;
Money Market Account
In addition to the online savings account, Ally Bank also offers a Money Market Account (see current rate below). The rate isn’t as good as the rate of the online savings account mentioned above, but you get the extra benefits such as checking writing ability (however, there’s still the 6 withdrawals per month limit) and ATM fee reimbursement (up to $6 per month). The account is also FDIC insured and interest is compounded daily, the same as the savings account.
I am not a fan of money market accounts and checking writing and ATM fee reimbursement, though they are nice features, never really interest me. The only reason that I get an online account is for its interest rate, the higher the better. Therefore, if I ever have an account with Ally Bank, the Online Savings Account is what I want, not the Money Market Account.
Certificate of Deposits
If you are looking for fixed rate products, Ally Bank has two kinds of certificate of deposits (CDs): One is classic fixed rate, fixed term CDs with maturities from 3 months to 5 years. The other, and more interesting one, is a 9-month no penalty CD. The way the no penalty CD works is that you can withdraw your money and earn interest without any penalty after you keep the money in the account for the first 6 days after the account is funded.
If you ask me my opinion about Ally Bank’s three products, then I think I like think I like the 9-month no penalty CD the most for several reasons. First, the interest rate is fixed for 9 months. Right now we probably have already seen the lowest interest rate. The rate can only go higher from here. However, given the current status of the economy and job market, the rate will likely remain low for some time. If that’s the case, then the rate is very attractive. Second, even if the interest rate goes up sooner then expected, the no penalty feature allows me to get out early and put the money in products with better rates without being charged any fee. Finally, there’s no penalty after only 6 days. That’s nothing.
Of course, the concern of doing business with Ally Bank is whether the bank is *safe*, given all the troubles at GM and GMAC. The government stress-test results show that GMAC will need to raise $11.5 billion capital for the worst case scenario. That may give people negative impressions about the bank. While the concern is real, I won’t worry about the safety of my money if I have an account with the bank because it’s protected by the FDIC insurance. Actually, I would worry more about whether Ally Bank’s interest rates are subject to the Fed’s interest rate regulation than whether my money is safe.
Now I am seriously consider getting an account myself. Actually, not one account but two. First an online savings account that links to my external accounts, then use that account to fund a 9-month no penalty CD account. I usually don’t want to own CDs because of the lack of flexibility (plus, many short-term CDs don’t beat savings accounts). But this CD is different because of its high yield and no penalty early withdrawal.
Ally Bank Rates Summary
The following are the up-to-date rates for Ally Bank products.
Are you using Ally Bank? What do you think about its products?
Update (March 01, 2010): Ally Bank now offers an interest checking account.
Update: I eventually opened an Ally Bank Online Savings Account and a 9-month No Penalty CD Account.
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