At most banks, if you close a CD before it’s maturity period you pay a penalty of 90 or 180 days. 90 days, or three months, is the penalty for shorter CDs, generally less than 12-months. The 180 day penalty is reserved for CDs with maturity periods of 12-months or more. What makes Ally Bank rare isn’t the clever advertisements or the great customer service (I’ve used their online chat features 3-4 times in the last few days, it’s absolutely wonderful), but higher rates and one of the most generous CD termination penalties on the planet.

The penalty is only **60 days of interest**, regardless of the maturity of the CD.

The 60 day penalty is based on the APY and your starting balance. In other words, you don’t lose the “last 60 days of accrued interest,” you lose 60 days of interest as calculated by the APY on your initial deposit. I don’t know if every bank calculates the penalty this way but an Ally Bank CSR said that’s how they do it.

Such a short penalty means you can get an effective APY of 2.1387% on a CD of only 7 months right now. If you wait a year, you get close to 2.50% APY (2.4987%), which is a fantastic rate right now. Compare these to the best CD rates ^{[3]} and almost nothing compares.

## Get the Spreadsheet

I created a spreadsheet to help you calculate this yourself. What I’m hoping to get from you all is a double check of my math to ensure what I’ve done is correct!

## How to Use the Ally CD Spreadsheet

Set the values highlighted in yellow:

- For
**Rate and APY**, go to Ally Bank^{[5]}and get their current 60-month CD rate. At the time of this writing, the APY was 2.99% (APR 2.95%). **Starting balance**refers to how much you will deposit into the CD.**Penalty**refers to the number of days of the CD penalty. In Ally’s case, it’s 60 days. You can change this to compare the rate against other banks with different penalty periods.

The number in the APY value is your effective APY if you close the CD at the start of that month. So if you close a CD at the start of month 7, you’d get an effective APY of 2.1387% over the last 7 months.

## About the Ally CD Spreadsheet

The bold labeled columns are self-explanatory but the unlabeled ones are intermediate mathematical steps to convert the dollar yield into a annual percentage yield figure you can use to compare against other CD rates.

“TIP” stands for total interest percentage. I take the total interest earned and divide it by the principal, giving you a percentage yield over the period. So the value in the Month 3 column is the yield over 3 months. “MR” stands for monthly rate, which is a calculation of the interest earned each month over that period of time. APY is then calculated using the MR figure (MR^12).

The penalty value is calculated from this equation, provided by an Ally Bank CSR:

(Account Balance) x (Interest Rate) / (365 days in one year or 366 days in a leap year) x (# of days at that balance)

For simplicity I just assumed 365 days. The account balance refers to your starting account balance, the interest rate is your APY, and the # of days at that balance is 60 because it’s a 60 day penalty.

One caveat – this spreadsheet calculates interest on a monthly basis, whereas Ally Bank accrues interest daily. This means actual yields are going to be slightly higher than what’s calculated in our spreadsheet but not so much higher it’ll noticeably affect any decisions.

## CD Renewals

What makes this offer especially juicy is that if you have a CD maturing soon, you can renew it and take advantage of Ally banks’ 0.25% interest rate increase ^{[6]}. When you renew a CD, you can change the maturity period and the amount in the CD. I have a 12 month CD renewing soon and I increased the balance and made it a 60-month CD.

Is the spreadsheet accurate? What do you think of this offer?