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Three Things to Know Before You Buy Certificate of Deposit Accounts

Determining Your Best CD Choices

When exploring your savings options, you may be looking beyond regular savings accounts and considering a certificate of deposit. It's common for people to see the process as setting out to "buy" certificate of deposit (CD) accounts at a bank, but others see it as simply depositing money since these days you don't receive an actual "certificate." Either way, a CD can be a great way to save money.

Understanding CDs.
CDs are time deposits. When you open a CD, you agree that you will not withdraw the funds until the maturity date, which varies from a few months to several years after you open the account, depending on the term you choose. You can close a CD before the term ends, but you typically will pay an early withdrawal penalty for doing so. CD rates vary by financial institution, but are usually higher than the rate you'll receive when you place the same amount into a savings account for the same amount of time.

Three things to know before you open a CD:

  1. Minimum deposit requirements. Many banks require a certain minimum opening deposit to get their best CD rates. It’s important to understand how your deposit will affect your return, so do your homework and read the fine print. At Ally Bank you can open and fund a CD with any amount and still get great rates.
  2. Frequency of compounding interest. The more frequently a financial institution compounds interest, the faster your balance grows. Some banks compound interest on a monthly, quarterly or even annual basis. At Ally Bank, we compound your interest daily. So be sure to check the annual percentage yield (or APY) when comparing rates—it reflects both the interest rate and the compounding interest.
  3. Early withdrawal penalty. Be sure you understand the CD’s early withdrawal penalty, even if you don't think you're going to take your money out before the CD matures. If you do need to withdraw your funds before maturity, you don’t want the penalty to be a surprise. As an alternative, take a look at the Ally Bank 11-month No Penalty CD. This CD allows you to withdraw all your money, including interest earned, without any penalty, any time after the first six days following the date you fund your account.

Ally Bank offers choices.
Online banks like Ally Bank generally offer higher interest rates than brick and mortar banks, but the types of CDs and their respective benefits can differ. Always do your homework and make sure you know the terms and conditions of each product you consider. Three popular choices offered by Ally Bank include:

  • High Yield CD: A CD with a fixed rate for a fixed term.
  • No Penalty CDs: A CD that allows you to withdraw all your money, including interest earned, without any penalty, any time after the first six days following the date you fund your account.
  • Raise Your Rate CDs: With these CDs, you have the option of a one-time rate increase if our 2-Year CD rate goes up; you have the option to increase your rate twice (two times) if our 4-Year CD rate goes up.

Check out our competitive interest rates and start saving smart today. Learn more by visiting Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559).