Ally 2% no penalty CD

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anthonypals
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Ally 2% no penalty CD

Post by anthonypals »

Ally just bumped up their no penalty CD to 2%. Seems like a good spot for the emergency fund. I’ve never used their CD before but seems pretty straight forward.
jebmke
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Re: Ally 2% no penalty CD

Post by jebmke »

What are MM funds running at brokerages?
Don't trust me, look it up. https://www.irs.gov/forms-instructions-and-publications
cowbman
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Re: Ally 2% no penalty CD

Post by cowbman »

A little above 2%, like 2.1-2.2%
the_wiki
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Re: Ally 2% no penalty CD

Post by the_wiki »

Can get 2% normal savings account at E-trade or Wealthfront.
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retired@50
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Re: Ally 2% no penalty CD

Post by retired@50 »

Vanguard Federal Money Market Fund - the default for settlement accounts, is currently paying 2.11% (as of 8/15/2022).

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MikeG62
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Re: Ally 2% no penalty CD

Post by MikeG62 »

anthonypals wrote: Wed Aug 17, 2022 8:24 am Ally just bumped up their no penalty CD to 2%. Seems like a good spot for the emergency fund. I’ve never used their CD before but seems pretty straight forward.
It's good to see that the NP CD rate has finally exceeded the high yield savings account rate.

For someone who wants to hold excess cash at a bank, this is obviously a better option than their high yield savings account.

However, one can do better in a prime MMF at a broker (like FZDXX or SRPXX at Fidelity or VMFXX at Vanguard). My excess cash is in FZDXX.
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the_wiki
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Re: Ally 2% no penalty CD

Post by the_wiki »

My only issue with the money market funds is that my broker (E*Trade) charges me a $50 trade fee on mutual funds held less than 90 days from first purchase. So I’m hesitant to park my emergency fund there and lose a month's interest if I have to pull out some money next month.

They are paying 2% on savings as I said above, so close enough for now. If Prime MMF goes up higher it may be worth moving to half my money at a time.
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Re: Ally 2% no penalty CD

Post by indexfundfan »

the_wiki wrote: Wed Aug 17, 2022 8:37 am My only issue with the money market funds is that my broker (E*Trade) charges me a $50 trade fee on mutual funds held less than 90 days from first purchase. So I’m hesitant to park my emergency fund there and lose a month's interest if I have to pull out some money next month.

They are paying 2% on savings as I said above, so close enough for now. If Prime MMF goes up higher it may be worth moving to half my money at a time.
There is no early redemption fee for NTF money market funds at Etrade. Read the fine print.
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Re: Ally 2% no penalty CD

Post by the_wiki »

indexfundfan wrote: Wed Aug 17, 2022 8:42 am
the_wiki wrote: Wed Aug 17, 2022 8:37 am My only issue with the money market funds is that my broker (E*Trade) charges me a $50 trade fee on mutual funds held less than 90 days from first purchase. So I’m hesitant to park my emergency fund there and lose a month's interest if I have to pull out some money next month.

They are paying 2% on savings as I said above, so close enough for now. If Prime MMF goes up higher it may be worth moving to half my money at a time.
There is no early redemption fee for NTF money market funds at Etrade. Read the fine print.
You are correct. I checked again and it was actually a $20 trade fee that threw me off. Was looking at FMPXX and FZDXX as the best performers a couple weeks ago and both had transaction fees. But it looks like PCOXX is available with no fees and 2.18% now so that is an option to consider over the savings account. Thanks for your comment - it made me recheck and find some options.

FMPXX is paying 2.3% 7 day yield now, if you can get it without fees.
wannabebogler
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Re: Ally 2% no penalty CD

Post by wannabebogler »

Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
invest4
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Re: Ally 2% no penalty CD

Post by invest4 »

Convenience may be a factor, but you may want to shop around a a bit more...recently saw a 9 month certificate for 2.8% on depositaccounts.com
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Re: Ally 2% no penalty CD

Post by the_wiki »

wannabebogler wrote: Wed Aug 17, 2022 11:23 am Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
Oh definitely. It was paying zero last year.
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Re: Ally 2% no penalty CD

Post by humblecoder »

wannabebogler wrote: Wed Aug 17, 2022 11:23 am Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
Yes. Actually, I was thinking along the same lines when I read this thread. The people who are recommending using a MMF are forgetting that the CD locks in your rate, whereas a MMF's return is going to go up or down.

Even if a MMF has a slightly higher yield today, it might not stay that way. With the Ally no penalty CD, you are GUARANTEED 2% for 11 months. And if rates go up, you can always withdraw your money from the CD with no penalty and invest it in a higher yielding account. All upside, no downside.
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Re: Ally 2% no penalty CD

Post by indexfundfan »

the_wiki wrote: Wed Aug 17, 2022 11:03 am
indexfundfan wrote: Wed Aug 17, 2022 8:42 am
the_wiki wrote: Wed Aug 17, 2022 8:37 am My only issue with the money market funds is that my broker (E*Trade) charges me a $50 trade fee on mutual funds held less than 90 days from first purchase. So I’m hesitant to park my emergency fund there and lose a month's interest if I have to pull out some money next month.

They are paying 2% on savings as I said above, so close enough for now. If Prime MMF goes up higher it may be worth moving to half my money at a time.
There is no early redemption fee for NTF money market funds at Etrade. Read the fine print.
You are correct. I checked again and it was actually a $20 trade fee that threw me off. Was looking at FMPXX and FZDXX as the best performers a couple weeks ago and both had transaction fees. But it looks like PCOXX is available with no fees and 2.18% now so that is an option to consider over the savings account. Thanks for your comment - it made me recheck and find some options.

FMPXX is paying 2.3% 7 day yield now, if you can get it without fees.
I buy VMFXX at Etrade. No fees at all.
You could also do the same with VUSXX, though its yield is currently not competitive with VMFXX.
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wannabebogler
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Re: Ally 2% no penalty CD

Post by wannabebogler »

humblecoder wrote: Wed Aug 17, 2022 11:32 am
wannabebogler wrote: Wed Aug 17, 2022 11:23 am Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
Yes. Actually, I was thinking along the same lines when I read this thread. The people who are recommending using a MMF are forgetting that the CD locks in your rate, whereas a MMF's return is going to go up or down.

Even if a MMF has a slightly higher yield today, it might not stay that way. With the Ally no penalty CD, you are GUARANTEED 2% for 11 months. And if rates go up, you can always withdraw your money from the CD with no penalty and invest it in a higher yielding account. All upside, no downside.
Is there a taxable issue then? Otherwise, I'm not quite sure why one would go with the MM option, unless it's just a matter of convenience?
the_wiki
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Re: Ally 2% no penalty CD

Post by the_wiki »

humblecoder wrote: Wed Aug 17, 2022 11:32 am All upside, no downside.
The downside is that you are already starting lower than some MMF are paying. And yes there are convenience issues with CDs, in that usually you cannot just make a partial withdrawal.
wannabebogler
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Re: Ally 2% no penalty CD

Post by wannabebogler »

the_wiki wrote: Wed Aug 17, 2022 12:43 pm
humblecoder wrote: Wed Aug 17, 2022 11:32 am All upside, no downside.
The downside is that you are already starting lower than some MMF are paying. And yes there are convenience issues with CDs, in that usually you cannot just make a partial withdrawal.
Ally's NP CD has worked pretty flawless for me for years. I've ended it early a few times to take advantage of a better NP CD rate. It wouldn't be difficult to liquidate and then buy back in the NP CD with the new amount. Just an FYI.
passive101
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Re: Ally 2% no penalty CD

Post by passive101 »

Ally bank has been upping the interest in their regular savings account every couple of weeks. I would not park any money in a CD currently myself. They're currently at 1.75% for typical savings.
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Re: Ally 2% no penalty CD

Post by wannabebogler »

passive101 wrote: Thu Aug 18, 2022 2:34 am Ally bank has been upping the interest in their regular savings account every couple of weeks. I would not park any money in a CD currently myself. They're currently at 1.75% for typical savings.
The no-penalty CD is 2%. Why not just invest in that until Ally increases the rate on the savings or the NP CD?
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Re: Ally 2% no penalty CD

Post by anon_investor »

wannabebogler wrote: Thu Aug 18, 2022 8:29 am
passive101 wrote: Thu Aug 18, 2022 2:34 am Ally bank has been upping the interest in their regular savings account every couple of weeks. I would not park any money in a CD currently myself. They're currently at 1.75% for typical savings.
The no-penalty CD is 2%. Why not just invest in that until Ally increases the rate on the savings or the NP CD?
I would do that if not for the fact that I can get more than 2% right now in my brokerage money market funds (which is where I have moved the bulk of my savings).
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Re: Ally 2% no penalty CD

Post by drg02b »

humblecoder wrote: Wed Aug 17, 2022 11:32 am
wannabebogler wrote: Wed Aug 17, 2022 11:23 am Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
Yes. Actually, I was thinking along the same lines when I read this thread. The people who are recommending using a MMF are forgetting that the CD locks in your rate, whereas a MMF's return is going to go up or down.

Even if a MMF has a slightly higher yield today, it might not stay that way. With the Ally no penalty CD, you are GUARANTEED 2% for 11 months. And if rates go up, you can always withdraw your money from the CD with no penalty and invest it in a higher yielding account. All upside, no downside.
Yes, but... VMFXX is largely tied to the federal funds rate and the fed has indicated they plan to continue to raise this rate over the next 6 months. So when you know the fed is lowering rates, then VMFXX will drop. VMFXX has historically had a solid return except for the long period after the Great Recession and Covid Recession when they kept the funds rate near zero (and if course the bank CDs took a dive during these periods as well, though they did offer better than VMFXX). When fed funds rate is near/at 0%, banks will always offer something more competitive. But in other scenarios, something like VMFXX will usually outperform and will keep up at a quicker pace.
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Re: Ally 2% no penalty CD

Post by wannabebogler »

drg02b wrote: Thu Aug 18, 2022 8:41 am
humblecoder wrote: Wed Aug 17, 2022 11:32 am
wannabebogler wrote: Wed Aug 17, 2022 11:23 am Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
Yes. Actually, I was thinking along the same lines when I read this thread. The people who are recommending using a MMF are forgetting that the CD locks in your rate, whereas a MMF's return is going to go up or down.

Even if a MMF has a slightly higher yield today, it might not stay that way. With the Ally no penalty CD, you are GUARANTEED 2% for 11 months. And if rates go up, you can always withdraw your money from the CD with no penalty and invest it in a higher yielding account. All upside, no downside.
Yes, but... VMFXX is largely tied to the federal funds rate and the fed has indicated they plan to continue to raise this rate over the next 6 months. So when you know the fed is lowering rates, then VMFXX will drop. VMFXX has historically had a solid return except for the long period after the Great Recession and Covid Recession when they kept the funds rate near zero (and if course the bank CDs took a dive during these periods as well, though they did offer better than VMFXX). When fed funds rate is near/at 0%, banks will always offer something more competitive. But in other scenarios, something like VMFXX will usually outperform and will keep up at a quicker pace.
During those periods you mentioned that took a dive, you would still have the locked-in CD rate.
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Re: Ally 2% no penalty CD

Post by drg02b »

wannabebogler wrote: Thu Aug 18, 2022 8:58 am
drg02b wrote: Thu Aug 18, 2022 8:41 am
humblecoder wrote: Wed Aug 17, 2022 11:32 am
wannabebogler wrote: Wed Aug 17, 2022 11:23 am Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
Yes. Actually, I was thinking along the same lines when I read this thread. The people who are recommending using a MMF are forgetting that the CD locks in your rate, whereas a MMF's return is going to go up or down.

Even if a MMF has a slightly higher yield today, it might not stay that way. With the Ally no penalty CD, you are GUARANTEED 2% for 11 months. And if rates go up, you can always withdraw your money from the CD with no penalty and invest it in a higher yielding account. All upside, no downside.
Yes, but... VMFXX is largely tied to the federal funds rate and the fed has indicated they plan to continue to raise this rate over the next 6 months. So when you know the fed is lowering rates, then VMFXX will drop. VMFXX has historically had a solid return except for the long period after the Great Recession and Covid Recession when they kept the funds rate near zero (and if course the bank CDs took a dive during these periods as well, though they did offer better than VMFXX). When fed funds rate is near/at 0%, banks will always offer something more competitive. But in other scenarios, something like VMFXX will usually outperform and will keep up at a quicker pace.
During those periods you mentioned that took a dive, you would still have the locked-in CD rate.
Yes for 11 months. But those CD rates will constantly lag VMFXX in a rising rate environment, and will likely never cover the gap. Plus you'll be constantly checking rates to cancel/renew the CD.
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Re: Ally 2% no penalty CD

Post by prozario01 »

anthonypals wrote: Wed Aug 17, 2022 8:24 am Ally just bumped up their no penalty CD to 2%. Seems like a good spot for the emergency fund. I’ve never used their CD before but seems pretty straight forward.
thanks - totally didn't notice it. I have proceeded from a house sell this week, sitting at Chase (around 0% lol) - and was thinking if i need to open another saving account. I already have ally - saving is around 1.8% i think - but why not put it on no penalty CD. I know there might be other options - but since i got an account already - just lot more convenient.
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Re: Ally 2% no penalty CD

Post by RMD3819 »

A related question..

I have $20K at Ally 4 year raise your rate currently at .70 and am eligible to increase it to 2.25 and I would still have one more option to raise it.

Anyone see a downside to raising it to 2.25% now?
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Re: Ally 2% no penalty CD

Post by retired@50 »

RMD3819 wrote: Fri Aug 19, 2022 11:15 am A related question..

I have $20K at Ally 4 year raise your rate currently at .70 and am eligible to increase it to 2.25 and I would still have one more option to raise it.

Anyone see a downside to raising it to 2.25% now?
I'd raise it. You'd be tripling your rate. That's a pretty significant increase.

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Re: Ally 2% no penalty CD

Post by Northern Flicker »

wannabebogler wrote: Wed Aug 17, 2022 11:23 am Question - can't Vanguard Federal Money Market Fund go below the 2% NP CD? Or is it just the expectation that it won't?
Correct. A no-penalty CD at a bank is equivalent to an FDIC-insured money-market account with a minimum rate guaranteed for a period of time. The Vanguard Federal MMF is a very good product, but it is not the equivalent.
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Re: Ally 2% no penalty CD

Post by prozario01 »

RMD3819 wrote: Fri Aug 19, 2022 11:15 am A related question..

I have $20K at Ally 4 year raise your rate currently at .70 and am eligible to increase it to 2.25 and I would still have one more option to raise it.

Anyone see a downside to raising it to 2.25% now?
You should check how much is the penalty if you just close the CD. Because ally has a 3-year CD for 3% - also 5 year. CD for 3% . I think for your CD it may be 4-month penalty (or around $47 dollar). You might just do better to take the hit and go for 3% CD for 3 or 5 years (they don't seem to have a 4 year CD).

So you lose .70 interest for 4 month but with 3% CD - that's exra .75% over 2.25% rate. So gain extra .75% by taking extra hit now - you should come ahead roughly after 4th month. And from then on - you're good with 3%.
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Re: Ally 2% no penalty CD

Post by mostlyyes »

I’m considering doing this, thanks for posting.

Would a 1 year treasury bill be more or less preferable than the 2% 11 month NP CD? The yield on that today looks like 3.26.

-mostlyyes
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Re: Ally 2% no penalty CD

Post by radiowave »

mostlyyes wrote: Fri Aug 19, 2022 4:28 pm I’m considering doing this, thanks for posting.

Would a 1 year treasury bill be more or less preferable than the 2% 11 month NP CD? The yield on that today looks like 3.26.

-mostlyyes
The 6 mo treasury is just over 3%.
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Re: Ally 2% no penalty CD

Post by Mr. Potter »

4 week Treasuries paying 2.184% with no state tax, if tying your money up for 4 weeks is a problem just split your money and buy them every 2 weeks.
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Re: Ally 2% no penalty CD

Post by ebeb »

Oak&Elm wrote: Fri Aug 19, 2022 7:07 pm 4 week Treasuries paying 2.184% with no state tax, if tying your money up for 4 weeks is a problem just split your money and buy them every 2 weeks.
Just bought $50k worth of 3mo t-bill at 2.6% and 6mo t-bill for 3.06% better than HYSA or CDs at present.
Last edited by ebeb on Sat Aug 20, 2022 9:44 am, edited 1 time in total.
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Re: Ally 2% no penalty CD

Post by Artsdoctor »

https://www.ally.com/bank/no-penalty-cd/

An 11-month CD at 2.00%? Interested in hearing about circumstances under which this might be appropriate.
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Re: Ally 2% no penalty CD

Post by anon_investor »

Artsdoctor wrote: Fri Aug 19, 2022 8:06 pm https://www.ally.com/bank/no-penalty-cd/

An 11-month CD at 2.00%? Interested in hearing about circumstances under which this might be appropriate.
I'd rather buy a 1 month treasury paying more.
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Re: Ally 2% no penalty CD

Post by Philly30 »

anon_investor wrote: Fri Aug 19, 2022 8:07 pm
Artsdoctor wrote: Fri Aug 19, 2022 8:06 pm https://www.ally.com/bank/no-penalty-cd/

An 11-month CD at 2.00%? Interested in hearing about circumstances under which this might be appropriate.
I'd rather buy a 1 month treasury paying more.
What is the process for doing that? Can it be done at treasurydirect.gov?
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Re: Ally 2% no penalty CD

Post by ebeb »

This blog describes how to buy treasury bills, I buy in schwab.com which is easy . treasurydirect.gov would be to buy at auction I think.
https://thefinancebuff.com/treasury-bil ... arket.html
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Re: Ally 2% no penalty CD

Post by anon_investor »

Philly30 wrote: Fri Aug 19, 2022 9:20 pm
anon_investor wrote: Fri Aug 19, 2022 8:07 pm
Artsdoctor wrote: Fri Aug 19, 2022 8:06 pm https://www.ally.com/bank/no-penalty-cd/

An 11-month CD at 2.00%? Interested in hearing about circumstances under which this might be appropriate.
I'd rather buy a 1 month treasury paying more.
What is the process for doing that? Can it be done at treasurydirect.gov?
Yes, or Vanguard, Fidelity, Schwab, other brokerages.
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Re: Ally 2% no penalty CD

Post by Philly30 »

Ok, thanks for the replies
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Re: Ally 2% no penalty CD

Post by MikeG62 »

the_wiki wrote: Wed Aug 17, 2022 11:03 am
FMPXX is paying 2.3% 7 day yield now, if you can get it without fees.
I get "reminded" by others all the time when I recommend FZDXX that it is not a viable option to most on the forum because it has a $100,000 minimum. Just checked and saw FMPXX has a $1.0 million minimum. :shock:
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Re: Ally 2% no penalty CD

Post by the_wiki »

MikeG62 wrote: Sat Aug 20, 2022 8:53 am
the_wiki wrote: Wed Aug 17, 2022 11:03 am
FMPXX is paying 2.3% 7 day yield now, if you can get it without fees.
I get "reminded" by others all the time when I recommend FZDXX that it is not a viable option to most on the forum because it has a $100,000 minimum. Just checked and saw FMPXX has a $1.0 million minimum. :shock:
On Etrade it shows $100 minimum, but $20 transaction fee.
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