High-yield savings account - Which type of Ally should I open?

Submitted by clong55 t3_12699rv in personalfinance

I am late to the HYSA game. Having Bof A as my sole checkings account for years, I realized I have missed out so much by not putting the bulk of my saving in an HYSA.

I have done some research and decided to start with Ally, but very baffled about the different types of accounts they offer:

  1. High Yield CD - 4.50% for 12-month term
  2. Raise Your Rate CD - 3.75% for 2-year term
  3. No Penalty CD - 4.75%

My goal is to save up for a house downpayment in the HYSA, and have my existing Bof A account to cover 2-3 months expenses for rent and such. And I expect infrequent withdrawal from the HYSA(maybe once every quarter or so). Any insights into which account to choose that would make the most sense in my case would be appreciated!

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[deleted] t1_je8879r wrote

Just move everything into Ally no penalty CD. You can have up to 40CDs at Ally so break them evenly into 40 so if you need money just break one and keep doing that.

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hlshshdkdhdjd58829 t1_je8ej0y wrote

It’s easier to fund CDs at ally if you have a savings, and the savings account is free with I believe no minimums. I would open a savings account, put money in there, then transfer (open) No Penalty CDs. There is literally no downside to doing no penalty vs savings, other than you can’t withdraw money piecemeal. That’s why the other person recommended breaking it up into several separate amounts

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AllTheyEatIsLettuce t1_je8f99v wrote

High yield offer will get you a few more dollars in interest if you take the 12 mo. option vs. the no penalty offer of 11 mos. only. Your timeline; your call.

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DaBlackMamba89 t1_je8fta0 wrote

If you expect to do an infrequent withdrawal I would avoid a CD, or at minimum keep what you may need to withdraw outside of the CD. While you could open and close with a no penalty CD it’s probably not worth the hassle and you may open and close at a bad time and get a worse rate.

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dangitme t1_je8h5ys wrote

You don’t have to open a CD if you just want the savings account (which is currently 3.75% I believe. It’s been getting increased every so often).

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benvwin t1_je8mpsa wrote

No penalty CD just got lowered to 4.35%

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RollTideHTX t1_je8nqlt wrote

I would just put everything into a HYSA, not a CD at the moment.

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According-Item-2306 t1_je8rq3x wrote

To make you feel better, up to 1 year ago, you were not missing much by having your money in a checking account as interest were very very low

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Fit_Vegetable_4922 t1_je9najn wrote

Replying to Dylan552 (#2,479,494)

I believe that typical "money market" accounts are not FDIC insured, while I know that the Ally savings account is. Given the state of the banking sector, and Ally's financial state in particular, I'm willing to sacrifice 0.25% for the knowledge that the FDIC is insuring all of my deposits.

EDIT: My assumption was incorrect; money market accounts by Ally are FDIC insured, so I'm also not seeing a substantive difference between the Ally savings and Ally money market account.

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Doktor_Z t1_je9ndnk wrote

A HYSA (High Yield Savings Account) is exactly that, a savings account. If that's what you are wanting, just the generic 'Ally Savings' account at 3.75% is what you want. This will be the perfect set it and forget it option. If you're interested in CD's which uncharacteristically have better rates, the you can choose one of the CD's listed. Others here have good advice on which to choose.

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Fancy-Fish-3050 t1_jea6a24 wrote

At Vanguard the Federal Money Market Fund which I use as my Vanguard brokerage account sweep currently has a 7 day SEC yield of 4.75%.

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benvwin t1_jea7te3 wrote

Replying to InfoMiddleMan (#2,486,679)

Yeah I just went ahead and opened it, since it’s no penalty. I’ll close it out and reopen it if the rate goes up again! Recommend doing that as well for money you might not need right away

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whisky_in_your_water t1_jeadxvg wrote

Replying to CodeWubby (#2,482,401)

Well, the money is locked up for a week, and AFAIK there's no autodraft for CDs, so there needs to be a little bit of consideration.

Also, you should probably open multiple CDs so you don't have to cash out everything if you just need a little bit of cash.

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ijm5012 t1_jeafd7g wrote

Replying to benvwin (#2,474,840)

Wow, just moved a bunch of money in to one last week when it was at 4.75%. For once it seems like I actually (unintentionally) timed something right, lol.

I wonder if they lowered the rate because they were getting a large influx of deposits? (pure speculation)

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HleCmt t1_jeajku6 wrote

I've held different accounts with Ally and so far so good. Their rates are on par with other online savings accounts.

Their MM rates are usually better than their Savings, comes with a debit card and it's much easier to access your cash in an emergency.

I'd suggest opening both, putting emergency funds in the MM and down payment funds in the Savings. Set up an auto transfer from your regular checking so that money disappears from your regular spending and consideration.

Regarding the CDs, if you truly plan to never touch them until maturity, go with whatever has the highest rate. Or you can ladder different CD maturity dates so some money will become available throughout the next X months or years. Then you can decide which terms and process you like better.

Personally, I'm dithering on locking a chunk of savings into the 18 month 5% CD now or wait to see if rates rise in May or June. Maybe both.

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Charming_Oven t1_jeb1s1k wrote

I would pick Wealthfront over Ally since it acts more like a checking account than a savings account. Still FDIC insured. 4.3% APY

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clong55 OP t1_jeb3rci wrote

Replying to HleCmt (#2,490,772)

Thanks for the thorough explanation! So all the CDs I listed in the description are not ideal if premature withdrawals are expected, even with the no-penalty option, correct? And MM is the most flexible when it comes to withdrawal, which is good for emergency funds. Following is Savings account which could be used for down payments, right?

But what is the reason for not putting the down payment money in CDs?

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clong55 OP t1_jeb8yio wrote

And to avoid transaction fees with Ally's money market/savings account, the rule of thumb would be to minimize outgoing wire transfers, i.e transfer money from Ally to a different bank, right?

Transfer between accounts within Ally, and from Ally to say, National grid/Verizon for utilities should be free, as those are considered ACH transfers?

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JumpKP t1_jebcegh wrote

Go with ufb direct. They're at 5.02%

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EqualSein t1_jebkghu wrote

Replying to clong55 (#2,496,157)

Yes but Ally's No Penalty CD allows you to break it whenever you want and transfer the money to your ally savings account immediately so you get the best of both there.

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EqualSein t1_jebmxxi wrote

Replying to clong55 (#2,500,118)

Only difference besides the interest rate is that money market accounts will give you checks and a debit card while savings accounts won't. You can instantly move money between Ally accounts on the website or in the app so this really shouldn't matter much.

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HleCmt t1_jecabxr wrote

Replying to clong55 (#2,495,683)

You're welcome. I don't considering No Penalty CD one of the better options because the rates are lower than other HY CDs and can only be locked in for 11 months. The rates are still better than a savings/mm account but the funds aren't as quickly/immediately available. If you're worried premature withdrawals may become a reality then I'd suggest putting some money into a No-penalty for peace of mind.

Yes, MM funds are most-immediately available via the debit card. Keep in mind if you need to transfer money from your Ally Savings into your MM it's immediately available but you need access to an Ally recognized phone/computer.

The reason for not putting all my funds into CDs is just a matter of preference. I prefer to have a mix of options, partly hedging and quick access to funds for other opportunities. On the other hand HYCD rates haven't been this high since 2010 so it's a unique opportunity. On the other other hand if you put all your funds into long term CDs and need to early-withdraw your interest penalty could cancel out the additional interest accrual of a CD over a Savings/MM, which is immediately accessable.

To start I suggest you open a Savings and MM asap. It will take your current bank around 3 days to transfer your funds so you're looking at next week. In the meantime use one of the CD interest calculators on Ally or elsewhere to compare numbers, timing and determine what feels best for you.

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clong55 OP t1_jefvjp8 wrote

Replying to HleCmt (#2,505,920)

very helpful to learn about different perspectives!

Another quick question about CDs, what happens after the term is up? Do we have the option to renew the term, or do we have to move everything out of the CDs?

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