The likelihood of interest rates for bank deposits increasing from the historical lows that they are at now is pretty high. I personally have been sitting on the sideline with cash, or investing in lower time commitment (3 & 6 month) and subsequently lower yield Certificate of Deposits (CD’s) because I’ve been anticipating an increase.
If you’ve been in the same situation, you might want to look into a ‘raise your rate’ CD. I discovered one of these offered by Ally Bank, called the Ally Bank Raise Your Rate CD. I didn’t have any luck finding a similar option at another bank, so if you are able to, please share in the comments.
What is a ‘Rising Rate CD’?
Essentially, a ‘rising rate CD’ is a Certificate of Deposit that allows you to increase the interest rate from whatever it is at the time you make your deposit to a higher interest rate at a later time within your CD’s life. It is a great option if you want to make a decent yield on your savings at a rate higher than a savings account, but are fairly certain that rates will go up during the length of your CD’s term. We’re exactly in that situation right now, in my opinion. I can’t see interest rates staying at these historical lows for much longer, particularly with the impending inflation coming from the debt our country is in. So why not earn a decent yield now and an even better yield later?
The Ally Bank Raise Your Rate CD
I’m a big fan of Ally Bank because they really do offer products that are in their customers’ best interests. The Ally Raise Your Rate CD is definitely one of those products. It is a 2-year term CD with some great features that put it at the top of its class:
- Open with $0 – no minimum to open
- No monthly fees for the CD
- Ten Day Best Rate Guarantee – note that this is one of my favorite features. Instead of taking whatever the interest rate is the day you fund the CD (like most banks), Ally will apply the best interest rate within ten days of opening or when your Ally CD renews, you automatically get the best rate offered during those ten days.
- Daily compound interest for maximum earnings (most banks do monthly or quarterly compounding).
- FDIC insured.
- Automatic renewal at maturity – Initial deposit plus earned interest
But, the key feature, and the reason that I thought this product was worthy of review on 20somethingfinance, is the ability to ‘raise your rate’ on the CD. If, at any point, during the 2 year CD term you would like to increase your initial interest rate yield to whatever it is at the present time, you can call Ally and ask them to increase the rate. And there is no cost to do so. How beautiful is that? Protection, or insurance, against rising rates! Now there is no excuse to sit on the sidelines with your cash because you are afraid rates will increase.
Bank CD Rate Comparison
How do Ally Bank CD Rates compare with other banks? Pretty darn well, actually. At the time of this post, Ally is offering 1.99% on this CD (you may want to check their site for the latest rate). At the same time, their biggest online bank competitors were offering much less for the same term – Ing Direct at 1.10%, Bank of America at 1.10%, Chase at 1.01%, and HSBC Advance at 0.75%. I’d encourage you to compare Ally’s yield at the time you read this with the other banks listed to make sure it is still the best. But as of right now, they are not only beating the competition, they are blowing it out.
Any Downsides to the CD?
I always try to give fair product reviews and cover the downsides. No erroneous fees – check. No high minimum – check. No huge penalty for early withdrawal – check. Like most CD’s, the Ally Raise Your Rate CD has an early withdrawal fee if you pull your money out before it matures. The early withdrawal fee is 60 days of earned interest, which is actually much more lenient than other CD’s that I have owned. I couldn’t find any downsides or ‘tricks’ to screw over the little guy in the fine print.
Final Thoughts on the Ally Raise Your Rate CD
If you’re in the market for a CD or have cash sitting around in a checking or savings account, I don’t think there is a better CD on the market right now than the Ally Bank Raise Your Rate CD.
Ally Bank CD Discussion:
- Have you purchased a CD from Ally before?
- What interest rate are you currently earning on your CD’s?
- What do you think of this CD?