Ally Bank Delivers Lower CD Rates Than Promised; Also No Pony

A few weeks ago, we posted about the rebranding of and promising new start for Ally Bank, formerly GMAC. But one new customer isn’t very enthusiastic about their services.

Using the metaphor of the commercial at left, reader Bryan thinks that Ally is giving investors a plastic pony, and hoping they won’t notice. He wrote to Consumerist last week:

Ally Bank made headlines with their high interest rates on their savings accounts and CDs. (CDs are fixed interest rate investments and mature like bonds). Even the consumerist reported on it to notify their readers of the high rates.

I signed up for a 9-month [traditional] CD on Thursday 6/4, and my funds were transferred electronically the next day. Throughout the sign up process they probably mentioned my rate of 2.60% 3-4 times, and even showed how much money I would make on maturity at this rate. Well, on Monday I signed into my account, just to make sure they had my funds and there were no problems. However, on the account details page I noticed that my rate was listed as only 1.90%! I was extremely confused and immediately called Ally to ask what was going on. The CSR told me they had the right to change my rate without notice before they received my funds, and they did just that on 6/5 Friday morning.

I have been investing in CDs for the past 15 years and I have never seen anything like this before. Maybe a 0.10% drop between the rate I was quoted and the time to mail a check, but never a 0.70% drop within a few hours of a quote! I am unsure whether this is legal or not, but I do know this is not the proper way for a bank to treat investors. I asked to speak to a supervisor and demanded they either change my rate back to 2.60% or close my account without penalty. They changed my rate back about 24 hours later without any further communication.

Bryan’s experience proves that the squeaky wheel does indeed get the .7%, but what happened to his interest rate? We contacted Ally Bank via e-mail, and will let you know what their response is.

Ally has indeed lowered their CD rates due to pressure from the FDIC, but they remain higher than those you’ll find at your neighborhood bank. Jim at Bargaineering wonders what’s going on:

A traditional CD should never have a lower yield than a no-penalty CD of the same maturity. With a no-penalty CD, you have the right to close the CD before the maturity period without penalty. The bank can’t close it. You should be paying, through a discount on the interest rate, for that flexibility. When the no-penalty CD first debuted, its interest rate was a tenth of a percent lower than the traditional CD’s rate.

Have you moved money to Ally Bank and noticed similar interest rate changes? Do other small banks advertising great rates online change their rates in a similar manner?

Ally Bank’s No Penalty CD Rate Arbitrage [Bargaineering]
Ally Bank bows to FDIC and cuts rate [CNN Money]