Ally Bank Review: Flexibility and Decent Yields
Ally Bank is one of the most prominent banks in the online space. While it seems that Ally is a new player in the banking game, the reality is that the bank’s roots actually date back to 1919 when the company now known as Ally Financial was founded as the General Motors Acceptance Corporation.
Ally Bank is a subsidiary of Ally Financial, and is known for its competitive yields on cash products, as well as its customer-friendly attitude.
A Brief History of Ally Bank
Ally Financial was started in 1919 as the General Motors Acceptance Corporation (GMAC), and was originally meant to help finance auto purchases for those buying GM cars. The company’s headquarters is in Detroit, Michigan.
Over time, the financial services offered by GMAC expanded to include consumer banking, mortgages, and even insurance. However, after decades, GM began selling its stake in the company. In 2006, a 51% stake in GMAC was sold to a consortium of buyers led by the private equity firm Cerberus Capital Management.
GMAC was hit hard by the financial crisis, and in 2008 received TARP funds. In 2009, GMAC Bank was rebranded as Ally Bank. The overall company name was changed to Ally Financial in 2010. Ally is still about 74% owned by the U.S. government, and an exit plan is being developed. Ally claims that it has repaid about $6.1 billion to the U.S. Treasury as of May 15, 2013.
Along with the rebrand, Ally began focusing heavily on customer service, and offering no-nonsense accounts with competitive yields. The consumer banking side of Ally is fairly basic, offering a few products and services, and receiving recognition for its efforts.
Ally is FDIC insured, so your accounts are protected up to the maximum amount. Additionally, Ally Bank has a mobile banking app that allows you to keep track of your accounts no matter where you are.
Features and Benefits Ally Bank
For savers looking for reasonably high yields, Ally Bank offers a few options. While you won't find as many products and services with Ally as you might find with other institutions, the offerings at Ally Bank focus on boosting yields on cash products, making Ally a decent choice for emergency fund holdings. On top of that, Ally Bank compounds interest daily, boosting your total earnings from interest.
Certificates of Deposit
Ally is well-known for its certificates of deposit. In 2012, MONEY Magazine awarded Ally the recognition for "Best One-Year CD." CD rates change often, but as of this writing the High Yield CD with a one-year term has a yield of 0.94%.
Ally also offers a no-penalty CD. This CD is a little different, in that you can withdraw your money early with no penalty (as long as you wait at least six days). This is a somewhat unique situation, especially since there is no minimum deposit to open the no-penalty CD. The yield on a no-penalty CD is lower than what you will get for a more conventional CD, but if you want the freedom to withdraw your money when you want, it can make sense to use this option.
You can also choose the "Raise Your Rate" CD, which allows you to take advantage of higher CD rates. If the rate rises during the term of the CD, you have the option to raise your rate. However, you can only raise your rate once during a two-year term, and twice during a four-year term. This is still a nice feature, however, since it gives you the opportunity to improve your yield, even after you are "locked in" by a specific maturity.
Ally also offers a handy CD laddering tool that can show you how to maximize your CD earnings with the help of a ladder.
Ally's online savings account has been recognized as one of the best savings accounts available. There is no minimum deposit to open your account, and no monthly maintenance fees. As of this writing, the variable APY on the savings account is 0.84%.
You can set up automatic deposits to your online savings account, and you can transfer money out of the account up to six times a month.
If you want a little more flexibility with your savings account, Ally offers a money market savings account. You receive free standard checks, as well as a Visa debit card. You don't have to pay ATM fees on the Ally end, and Ally will also reimburse your ATM fees from other banks. Because it is a savings account, you are limited to the six transactions per statement cycle if you want to avoid fees, pursuant to federal law.
You can earn interest on your checking account balance with Ally, and this can make the account a valuable addition to your emergency savings strategy, providing you with the ability to use your MasterCard debit card, as well as get free checks.
The checking account is compatible with Popmoney, allowing you to quickly and easily send and receive personal payments. You can make deposits remotely with eCheck Deposit, and you don't have to worry about ATM fees. On top of that, you can earn cash back with Ally Perks.
You can also find IRA-friendly products with Ally. The IRA CD options come with much higher yields, but you have to be willing to commit to a longer term. You can open a Traditional, Roth, or SEP IRA with Ally. However, carefully consider this option before you commit some of your contributions to cash products.
Ally Bank also offers links to other services that fall under the Ally Financial umbrella. One of these is auto financing and leasing. Even though this isn’t a service of Ally Bank, it’s possible to learn more about personal and business auto financing by following the link from Ally’s main web site.
Ally Bank has managed to successfully rebrand itself into a competitive bank with high yields and products that consumers hold in high esteem. Ally is straightforward in its materials, offering upfront information. As a place to park your emergency fund cash, Ally is a good choice, offering flexibility and good rates.
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