Understanding CDs

Have You Ever Wondered, How Do Certificates of Deposit Work?

September 2012

Certificates of deposit like the ones offered by Ally Bank are savings tools that allow you to earn interest on your money over a given period of time. How do certificates of deposit work? Well, in exchange for depositing your money with a bank, you will usually receive a fixed rate of interest on your money. When a CD matures, you get the principal you put in plus the interest earned. When the CD matures, your money can either be held/renewed or you can elect to withdraw the money. Ally Bank offers automatic renewal for their Certificates of Deposit, making it easy to build your savings.

Remember that you usually must keep your money in the CD for a specified period of time or you will be subject to an early withdrawal penalty. Ally Bank offers a No Penalty CD that allows you to withdraw your initial deposit and interest earned with no early withdrawal penalty, any time after the first six days of your deposit. Other CDs available range in length from a few days or months to several years. Generally, the shorter length of time you are required to hold a CD in a bank, the lower your interest rate will be.

The annual percentage yield (APY) on certificates of deposit can vary quite a bit from institution to institution. Online banks like Ally Bank generally offer competitive APYs because our overhead costs are lower.

The laddering of CDs in a diversified portfolio may allow you a chance to create a steady stream of income. Ladder the CDs skillfully and you may have regular interest coming in. CD laddering requires some planning, but the result is often worth the time investment upfront.

With rates that are consistently among the most competitive in the country, Ally Bank certificates of deposit can be opened and funded with any amount. Take a look at what we have to offer and start building your savings today by contacting us at 877-247-ALLY (2559) or by visiting Allybank.com, available 24/7.

High Yield CD

No Penalty CD

Raise Your Rate CD

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