Every week I get an email from Ally Bank ^{[3]} informing me of how the rates will be changing (Ally Bank rates are adjusted on Fridays) and their rate structure has been confusing me as long as I’ve been getting these emails.

## Ally Bank’s Savings & CD Rates

- As of August 28th 2009, their current online savings account interest rate
^{[4]}is 1.75% APY. - As of August 28th 2009, their current 9 month CD rate
^{[5]}is 1.55% APY. - As of August 28th 2009, their current 9 month no-penalty CD rate
^{[6]}is 1.85% APY.

*Rates are subject to change, here are the current Ally Bank CD rates ^{[7]}.*

## Why Is This Weird?

Typically, your online savings account interest rate should be the lowest of the three (CD rates ^{[5]} should be higher given restrictions). Next would be the 9 month no-penalty CD rate followed by the regular CD rate. You should get a lower interest rate on the account with the most flexibility. Since you withdraw money from a savings account at any time, you should be paid the least amount of interest in that account. Since you can withdraw your money from a no-penalty CD at any time without penalty, it should have a lower interest rate than a regular CD, where you would have to pay a penalty to access your funds.

Ally Bank has had this interest rate irregularity ^{[8]} for a while now but recently it’s come back in line.

## So What?

If you have money in Ally Bank’s online savings account ^{[3]}, you should open a 9 month no-penalty CD immediately and transfer all your funds into that CD. Should the online savings account interest rate ever increase past the no-penalty CD, then you could liquidate the no-penalty CD without penalty. If you need the money, you can liquidate the no-penalty CD.

In fact, the best strategy would be to open up multiple no-penalty CDs so that if you do need the cash you don’t have to close out one big CD. Ally Bank does not have a minimum for CDs. For example, if you have $5,000 to save and you aren’t sure if you need the money. Open up five $1,000 no-penalty CDs. If you need $500, you can just close one of the CDs. If you opened up one single $5,000 CD, then you’d have to liquidate the whole to get access to just $500.

Am I missing something?