Is a CD a Good Way to go When Planning for Your Future?

Three CD Products, all with Great Rates and No Minimum to Open

September 2012

There are many options for how to save money when planning for the future. Buying a certificate of deposit, or CD product, can be a good way to go if you're looking for a low-risk place to park money while earning interest at a rate that is usually higher than what savings accounts offer.

Here are a few reasons why a certificate of deposit can be beneficial for longer-term savings plans:

Interest Rates - Typically, certificates of deposit offer better interest rates than traditional savings accounts. In general, the longer the CD product's term, the higher the interest rate. For example, a 5-year CD product will usually give you a better annual percentage yield (APY) than a 1-year CD - of course, a longer-term CD means you'll need to commit to that term or risk paying an early withdrawal penalty.

Choosing a CD product term doesn't have to be an either/or situation, however. You could simply put part of your savings in a shorter-term CD and the rest in a longer-term CD (or even ladder your CDs over multiple terms).

Planning Ahead - Because most CD products have fixed terms, they can be particularly useful when saving for specific events in the future. Unlike withdrawing from a savings account, you usually can't take money out of a CD until it matures without paying a penalty. Some people find this helps them stick to their longer-term savings strategies. For example, if you're using a CD to help save for a wedding or vacation a few years down the line, you might not be tempted to take money out of the account knowing that you could pay a penalty.

Safety - For many people, keeping their money safe is one of the most important considerations when planning for the future. Certificates of deposit are often considered low-risk places to park money because you usually get a fixed rate for a certain amount of time. With Ally Bank CDs - as with other FDIC-member banks - your deposits are FDIC insured up to the maximum amount allowed by law.

Selection - Many financial institutions, including Ally Bank, offer a variety of CD products with different benefits to fit your financial plan. At Ally Bank, we offer three kinds of CDs:

  • High Yield CD - A certificate of deposit with our highest fixed CD rate for a variety of fixed terms ranging from three months to five years.
  • No Penalty CD - A fixed CD rate that has the freedom of a no early withdrawal penalty as long as you do not withdrawal your money until at least 6 days following the date you funded your account.
  • Raise Your Rate CD - A certificate of deposit with the option to increase your rate if our CD rates go up for your CD's term. You can opt to increase your rate once with the 2-Year and twice with the Raise Your Rate 4-Year CD.

Depending on your long-term goals, you might find that one CD fits your financial plan more than another. It's important to understand the differences between CDs before deciding which one is right for you.

With every Ally Bank CD, you can open and fund your account with any amount. Plus, our CDs compound interest daily for maximum earnings. If you have additional questions about Ally Bank CDs, or if you'd like to find out how to open a CD, you can reach us 24/7 by chatting with us on our website at or by calling 877-247-ALLY (2559).

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