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Understanding CDs

How Do Certificates of Deposit Work?

Certificates of deposit (CDs) 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. 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. If you decide to withdraw the money before the term is up (maturity), you may have to pay an early withdrawal penalty. Generally, the longer the CD term, the higher the interest rate.

Combining long- and short-term CDs is known as CD laddering. For example, rather than put $40,000 into a four-year CD, you might put $10,000 into four separate CDs—a one-year, an eighteen-month, a three-year and a four-year. When the first CD matures, you reinvest it in a four-year CD, repeating the process with the others as they become due. This CD rotation provides you with regular access to your money and allows you to take advantage of current CD interest rates.

At Ally Bank, there’s no minimum deposit to open any of our accounts and all of our CDs are backed by the Ally Bank Ten Day Best Rate Guarantee. We offer a variety of CDs to fit your savings goals, all with rates among the most competitive in the country. Learn more about our High Yield CD, No Penalty CD, and Raise Your Rate CD by visiting Allybank.com or call live, 24/7 customer care at 877-247-ALLY (2559) today.