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Ally Bank Ten Day CD Rate Guarantee

One of the most annoying things in personal finance is opening a bank account and then seeing the interest rate drop. This happened very often in the falling interest rate environment of the last year and a half. I remember opening an online savings account only to see the rate fall the next day! It’s not bait and switch, it’s not sneaky, and banks don’t do it on purpose because nothing stops you from leaving. Interest rates aren’t guaranteed. [3] It’s just how it is.

There is only one thing more annoying than falling interest rates, it’s rising interest rates after you’ve opened a new certificate of deposit! With CDs, if you close one before it matures, you will pay a penalty of three to six months’ interest. Again, it’s not bait and switch, it’s just the nature of fluctuating interest rates.

10 Day Rate Guarantee

That’s why it’s kind of nice of Ally Bank [4] to offer a ten day rate guarantee on all new and renewing certificates of deposit, especially given today’s CD rates [5]. If the rate goes up within ten days of you opening or renewing a CD, you get the new rate automatically. You don’t have to do anything, your rate is automatically increased.

When should you open a CD? As long as I’ve been looking at Ally Bank CD rates [6], they usually change their rates on Fridays. If you want the maximum window then you want to open your CD on a Wednesday or Thursday. This gives you two potential rate changes in your ten day window.

What else can you do? You can open up a bump-up CD, which lets you increase the rate once per CD, or a triple option CD [7], where one of the options is the bump up provision. The rates are usually lower than the same maturity CD at the same bank, because you have more options, but it can alleviate your fears of being locked into a lower interest CD.

In the end, remember that interest rates generally don’t move around a significant amount. Lately we’ve only see changes of 0.05% or 0.10% in either direction. Over the course of a year, an extra 0.05% APY on a CD with $1,000 is only fifty cents!

(Photo: puntodevista [8])