Ally bank CDs question

[AlwaysBeenASaver]

I'm going to be getting some Ally bank CDs so I was looking at the different options. The 2 year CDs pay 1.29%, with a 2 month penalty for early redemption. The 1 year CDs pay .89%. I can't figure out the advantage of ever getting a 1 year CD since it seems like if I want my $ in 1 year, I'm still better off getting a 2 year CD and redeeming it early and taking the penalty, which would work out to 1.075%. Am I missing something?

[3okirb]

I'm going to be getting some Ally bank CDs so I was looking at the different options. The 2 year CDs pay 1.29%, with a 2 month penalty for early redemption. The 1 year CDs pay .89%. I can't figure out the advantage of ever getting a 1 year CD since it seems like if I want my $ in 1 year, I'm still better off getting a 2 year CD and redeeming it early and taking the penalty, which would work out to 1.075%. Am I missing something?

It would be .5375% if you took it out after a year.  1.29 divided by 24 months is the monthly rate, times 10 (a year minus 2 month penalty.)

[AlwaysBeenASaver]

I'm going to be getting some Ally bank CDs so I was looking at the different options. The 2 year CDs pay 1.29%, with a 2 month penalty for early redemption. The 1 year CDs pay .89%. I can't figure out the advantage of ever getting a 1 year CD since it seems like if I want my $ in 1 year, I'm still better off getting a 2 year CD and redeeming it early and taking the penalty, which would work out to 1.075%. Am I missing something?

It would be .5375% if you took it out after a year.  1.29 divided by 24 months is the monthly rate, times 10 (a year minus 2 month penalty.)

Sorry, I didn't state that clearly. The 1.29% is an annual rate. I'm still perplexed by this.

[ToughMother]

The one year CD actually pays 1.05% (high yield).  [12 month   1.05%]  vs the raise your rate for 2 years (1.29%) which is about a wash when you subtract out the 2 month penalty and hold it for 12 months.

[Another Reader]

You are better off with some of the one year, 1.15 percent CD's listed here.

https://www.depositaccounts.com/cd/

The author also compares rates on products to rates on longer term products cashed in early with penalties in the weekly CD round up article.

https://www.depositaccounts.com/blog/cd-rates-survey/

[webguy]

You should also check out Ally's high yield savings account which is 0.99% with no restrictions or minimum deposits: http://www.ally.com/bank/online-savings-account/

I use it as my savings account as it's more flexible than a CD and only slightly less yield.

[AlwaysBeenASaver]

You are better off with some of the one year, 1.15 percent CD's listed here.

https://www.depositaccounts.com/cd/

The author also compares rates on products to rates on longer term products cashed in early with penalties in the weekly CD round up article.

https://www.depositaccounts.com/blog/cd-rates-survey/

Thanks for these links, that site is very useful and I wasn't aware of it. After clicking through on your links, I also found info there that indicated Ally Bank added terminology to their deposit agreement that indicates they don't have to allow one to redeem a CD early.

https://www.depositaccounts.com/blog/2012/10/ally-bank-changes-deposit-agreement-covering-cd-early-withdrawals.html

[AlwaysBeenASaver]

You should also check out Ally's high yield savings account which is 0.99% with no restrictions or minimum deposits: http://www.ally.com/bank/online-savings-account/

I use it as my savings account as it's more flexible than a CD and only slightly less yield.

Thanks, I'll have to look into that too!

[Another Reader]

Depositaccounts.com also has a list of high-yield savings accounts and another of high-yield money market accounts.  GE Capital Bank is currently paying 1.05 percent on their high yield savings.

[Jacana]

We did this actually. We put some inheritance money into a 5-year CD with Ally to get their highest rate and then took it out after less than a year after our situation changed. It wasn't exactly intentional, but we chose that option because of the lenient terms. We lost 60 days of interest, yes, but we still received all the remaining earnings which were higher than we would have earned in their savings account (which we also have and are very happy with) even after the penalty. The withdrawal process was actually pretty easy, just a phone call and a quick conversation with a representative. She did ask why we were withdrawing it, and I told her, and that was it. Took a few days to show up in our checking account with a different bank.