Ally Bank No-Penalty CD

Posted December 8, 2011

(eMoneyCentral.com) - With rates on bank products like savings accounts and certificates of deposit (CDs) falling almost daily, there is great incentive to lock-in a rate now to preserve future interest income. A CD account will do just that.

By depositing your money into a CD account, the bank agrees to give you a specific interest rate over the life of the CD term. In return, you, as a depositor, agree to not withdraw your principal (your deposit amount) until the CD term ends.

By getting a CD, you protect yourself from future rate cuts and the loss of income that results from it.

But what if you unexpectedly need the money before the term ends? Let's say that your car needs a new battery and you don't have enough money in your checking account to cover the cost? That money you've got locked away in the CD can come in handy right about now, but there is a catch. If you pull the principal amount out from the CD, you will incur a penalty. That penalty could be several months worth of interest.

That's one of the reasons people avoid getting a CD. It's the fear that they will need the money before the CD matures. In order to avoid the whole withdrawal penalty issue, they end up getting a savings account instead. So while they can withdraw funds without penalty, they wind up watching their interest rate diminish month after month as banks cut rates.

But Ally Bank has another option. It's a No-Penalty CD. It combines the benefits of locking-in a rate with the ability to get your money out penalty-free.

The No-Penalty CD lasts for a period of 11 months. That's 11 months of not having to worry about rate cuts and decreases in your monthly earnings. But the big benefit of this CD is that if you find that you need your money back before the CD matures, you can get your full balance back any time after the first six days of funding the account without penalty.

Another great thing about Ally Bank's No-Penalty CD is that you won't be giving up too many percentage points by choosing this CD over a regular CD or a savings account. As of this writing, the No-Penalty CD earns 0.96% annual percentage yield (APY) (UPDATE: The No-Penalty CD earns 0.91% APY as of 12-23-11). Ally Bank's regular 1-Year CD earns 1.02% APY and the No-Penalty CD actually earns more than Ally's Online Savings account which earns 0.89% APY.

So if you are one of those people comparing rates and can't decide between the ease of making withdrawals from a savings account or the ability to lock in a rate with a CD account, consider the Ally Bank No-Penalty CD. You can lock-in a decent rate for the next 11 months and withdraw your money without penalty if you need it.

The Ally Bank No-Penalty CD has no minimum deposit requirement to open. Interest compounds daily. Visit Ally Bank for more details on the No-Penalty CD.

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