Ally Bank Savings Review

Feb 1, 2013 by

Update effective 12 November 2013: Ally Bank has changed its online savings account’s APY to 0.85%!

Everybody needs an emergency fund. And you need a safe place to stash cash you’re saving for planned savings destined for near term spending like a vacation, a tuition payment, or a new washer/dryer. In these situations, you want all of your money to be there when you need it, so buying even so-called low risk stocks or bonds isn’t appropriate. And it’s nice to earn some interest too. With FDIC insurance and a competitive interest rate, Ally Bank’s online savings account is a good fit for this niche in your finances.

No Bricks, No Mortar

Ally is an online bank. I began liking online banks more once tellers at my brick & mortar bank began trying to sell me something each time I visited a branch to do business I can’t do at an ATM. I understand this new corporate strategy—every employee is a sales person—but I don’t have much patience for it. “Yes, I know you don’t approve of how I’ve invested my money, but could you just get this wire transfer done please??”

Still, if you’ve never done business with an online bank, it’s a bit of an adjustment, but I think one you’ll be glad you made. I take all the recommended security precautions, so I don’t worry about my accounts being drained by some teenaged Ukrainian hacker (a risk not unique to online banks of course).

ATM Network

Since your computer unfortunately doesn’t have the capability (yet) to spit out $20s, you may wonder how you get cash if you use an online bank. You can withdraw cash from your Ally accounts through a nationwide ATM network, and Ally will reimburse any fees. Use this search tool to find ATMs near you.

Online Savings Account

Ally offers checking, savings, CD, and IRA accounts, but I’d like to focus here on its Online Savings Account.

Update effective 12 November 2013: The account’s APY is 0.85%!

I know—that’s low compared to what you got in pre-meltdown days, but it’s an excellent rate for an FDIC-insured savings account today. And understand that the rate can and will, eventually, change—it’s 0.85% now.

Ally’s Online Savings Account has other attractive features:

  • No minimum deposit to open
  • No monthly maintenance fees
  • View your account on the go with Mobile Banking
  • Daily compounded interest for maximum earnings
  • FDIC insured to the maximum allowed by law. (If you’re clever, you can get virtually unlimited FDIC insurance.)
  • Six transactions per statement cycle with no fees

And Ally offers many options for sending the cash to open your account. You won’t even have to change out of your pajamas to get your account up & running. Click here to learn more.

How to Use Ally’s Online Savings Account

FDIC-insured savings accounts are extremely safe, highly liquid, and readily accessible. Because they’re risk-free, you shouldn’t expect to earn a high rate of return, even when the meltdown is a dim memory. But your principal is secure, up to FDIC insurance limits.

Given these characteristics, you’d typically use an account like Ally’s Online Savings for:

  • Your emergency fund.
  • A dedicated savings fund for a purchase you expect to make in less than, say, 5 years like a car, a house down payment, or a vacation.
  • If you’re a conservative, paranoid type like me who’s wary of Wall Street, you could keep a portion of your savings beyond the above examples in a high-yield, FDIC-insured account. Call it your “sleep well at night” fund.

We have a very large percentage of our savings in high-yield, FDIC-insured savings accounts, large enough to make any financial planner scream in horror (which is why we haven’t hired a financial planner). That strategy wasn’t always appropriate for us, and it may not be for you today. But no matter your situation, in my view you should have an account like Ally’s Online Savings because everyone needs to keep some portion of their savings handy and totally secure.

Disclosure: The links to Ally Bank’s online savings account in this post constitute affiliate advertising.

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