Submitted by clong55 t3_12699rv in personalfinance

I am late to the HYSA game. Having Bof A as my sole checkings account for years, I realized I have missed out so much by not putting the bulk of my saving in an HYSA.

I have done some research and decided to start with Ally, but very baffled about the different types of accounts they offer:

  1. High Yield CD - 4.50% for 12-month term
  2. Raise Your Rate CD - 3.75% for 2-year term
  3. No Penalty CD - 4.75%

My goal is to save up for a house downpayment in the HYSA, and have my existing Bof A account to cover 2-3 months expenses for rent and such. And I expect infrequent withdrawal from the HYSA(maybe once every quarter or so). Any insights into which account to choose that would make the most sense in my case would be appreciated!



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benvwin t1_je8mpsa wrote

No penalty CD just got lowered to 4.35%


jacktt t1_jea065t wrote

I just went to open one today at the 4.75 rate :(


davysaams t1_jea1gla wrote

Same, hope there’s a chance it goes up again


InfoMiddleMan t1_jea40li wrote

F*** I was literally holding off on this, thinking just yesterday I might be better off waiting a bit. Clearly I was wrong.


benvwin t1_jea7te3 wrote

Yeah I just went ahead and opened it, since it’s no penalty. I’ll close it out and reopen it if the rate goes up again! Recommend doing that as well for money you might not need right away


ijm5012 t1_jeafd7g wrote

Wow, just moved a bunch of money in to one last week when it was at 4.75%. For once it seems like I actually (unintentionally) timed something right, lol.

I wonder if they lowered the rate because they were getting a large influx of deposits? (pure speculation)


dangitme t1_je8h5ys wrote

You don’t have to open a CD if you just want the savings account (which is currently 3.75% I believe. It’s been getting increased every so often).


[deleted] t1_je8879r wrote

Just move everything into Ally no penalty CD. You can have up to 40CDs at Ally so break them evenly into 40 so if you need money just break one and keep doing that.


thabiiighomie t1_je92ali wrote

I just put $8,000 into one on Monday. If I need any of that money do I have to sell the whole thing?


[deleted] t1_je98swr wrote



thabiiighomie t1_je9hmgi wrote

So would it be wise to break that up next time in case the next rate is lower than the current rate?


[deleted] t1_je9m5un wrote



thabiiighomie t1_je9moq8 wrote

Thank you for that information. Glad I initiated my deposit Monday. They have that 10 day best rate guarantee.


hlshshdkdhdjd58829 t1_je8ej0y wrote

It’s easier to fund CDs at ally if you have a savings, and the savings account is free with I believe no minimums. I would open a savings account, put money in there, then transfer (open) No Penalty CDs. There is literally no downside to doing no penalty vs savings, other than you can’t withdraw money piecemeal. That’s why the other person recommended breaking it up into several separate amounts


clong55 OP t1_jeb5pqk wrote

Dumb requestion, difference between CDs vs. Savings accounts is that Savings account is more flexible for withdrawals, correct? And do CDs usually have higher rates than Savings?


MrBalll t1_jebbmwa wrote

In its simplest form yes, you have it correct.


EqualSein t1_jebkghu wrote

Yes but Ally's No Penalty CD allows you to break it whenever you want and transfer the money to your ally savings account immediately so you get the best of both there.


clong55 OP t1_jebluoe wrote

Gotcha. What about Ally's money market account over savings?


EqualSein t1_jebmxxi wrote

Only difference besides the interest rate is that money market accounts will give you checks and a debit card while savings accounts won't. You can instantly move money between Ally accounts on the website or in the app so this really shouldn't matter much.


Doktor_Z t1_je9ndnk wrote

A HYSA (High Yield Savings Account) is exactly that, a savings account. If that's what you are wanting, just the generic 'Ally Savings' account at 3.75% is what you want. This will be the perfect set it and forget it option. If you're interested in CD's which uncharacteristically have better rates, the you can choose one of the CD's listed. Others here have good advice on which to choose.


Any_Parsnip5967 t1_je8ig8d wrote

Ally money market is now at 4% as of last week


Dylan552 t1_je9bw9l wrote

What are the cons to using this as a savings account seems like it’s all upsides?


Just_a_mument t1_je9iz0f wrote

Probably just the limited amount of transactions per statement


Dylan552 t1_je9jb1y wrote

Savings account has a limit of 6 by law are money market accounts less than that? It didn’t seem that way


Fit_Vegetable_4922 t1_je9najn wrote

I believe that typical "money market" accounts are not FDIC insured, while I know that the Ally savings account is. Given the state of the banking sector, and Ally's financial state in particular, I'm willing to sacrifice 0.25% for the knowledge that the FDIC is insuring all of my deposits.

EDIT: My assumption was incorrect; money market accounts by Ally are FDIC insured, so I'm also not seeing a substantive difference between the Ally savings and Ally money market account.


Budget-Scared t1_je9ntge wrote

MMDAs are usually FDIC insured.


Fit_Vegetable_4922 t1_je9o82q wrote

Looks like you're right:,however%2C%20are%20not%20federally%20insured.

I was thinking of my money market account with Fidelity (my "core account"), which is probably not FDIC insured. But I don't expect my "investment" money to be insured, and it may lose value, so I'm OK with that.


Budget-Scared t1_jea6atb wrote

If its through fidelity I bet its invested and could technically lose value which is why its not FDIC insured. It's probably SIPC insured though.


gk802 t1_jeafoos wrote

Per ally customer service: "All accounts that Ally offers are FDIC insured."


Fancy-Fish-3050 t1_jea6a24 wrote

At Vanguard the Federal Money Market Fund which I use as my Vanguard brokerage account sweep currently has a 7 day SEC yield of 4.75%.


DaBlackMamba89 t1_je8fta0 wrote

If you expect to do an infrequent withdrawal I would avoid a CD, or at minimum keep what you may need to withdraw outside of the CD. While you could open and close with a no penalty CD it’s probably not worth the hassle and you may open and close at a bad time and get a worse rate.


Charming_Oven t1_jeb1s1k wrote

I would pick Wealthfront over Ally since it acts more like a checking account than a savings account. Still FDIC insured. 4.3% APY


RollTideHTX t1_je8nqlt wrote

I would just put everything into a HYSA, not a CD at the moment.


CodeWubby t1_je9o73u wrote

It takes a few seconds to move money from a HYSA to a no penalty CD and you get a better rate. This is a no brainer.


whisky_in_your_water t1_jeadxvg wrote

Well, the money is locked up for a week, and AFAIK there's no autodraft for CDs, so there needs to be a little bit of consideration.

Also, you should probably open multiple CDs so you don't have to cash out everything if you just need a little bit of cash.


RollTideHTX t1_jeb8qvl wrote

True, but if you’re just starting out with HYSA probably good to start with just a general account.


SwimmingBreadfruit t1_je8xdnw wrote



gensouj t1_je9gf6d wrote

Interest rates are still going up you don't want to be locked in. But a no penalty one is fine


CodeWubby t1_je9o7v0 wrote

No penalty CDs don't lock you in (and their rate actually just dropped 0.4%. Still higher than their HYSA rate)


gensouj t1_je9veei wrote

yes which is why i said no penalty one is fine. and yeah its better than their apy cause their apy is pretty low compared to many other places.


clong55 OP t1_jeb8yio wrote

And to avoid transaction fees with Ally's money market/savings account, the rule of thumb would be to minimize outgoing wire transfers, i.e transfer money from Ally to a different bank, right?

Transfer between accounts within Ally, and from Ally to say, National grid/Verizon for utilities should be free, as those are considered ACH transfers?


JumpKP t1_jebcegh wrote

Go with ufb direct. They're at 5.02%


BRCWANDRMotz t1_jea6qoz wrote

Dump b of a for a local credit union.


HleCmt t1_jeajku6 wrote

I've held different accounts with Ally and so far so good. Their rates are on par with other online savings accounts.

Their MM rates are usually better than their Savings, comes with a debit card and it's much easier to access your cash in an emergency.

I'd suggest opening both, putting emergency funds in the MM and down payment funds in the Savings. Set up an auto transfer from your regular checking so that money disappears from your regular spending and consideration.

Regarding the CDs, if you truly plan to never touch them until maturity, go with whatever has the highest rate. Or you can ladder different CD maturity dates so some money will become available throughout the next X months or years. Then you can decide which terms and process you like better.

Personally, I'm dithering on locking a chunk of savings into the 18 month 5% CD now or wait to see if rates rise in May or June. Maybe both.


clong55 OP t1_jeb3rci wrote

Thanks for the thorough explanation! So all the CDs I listed in the description are not ideal if premature withdrawals are expected, even with the no-penalty option, correct? And MM is the most flexible when it comes to withdrawal, which is good for emergency funds. Following is Savings account which could be used for down payments, right?

But what is the reason for not putting the down payment money in CDs?


HleCmt t1_jecabxr wrote

You're welcome. I don't considering No Penalty CD one of the better options because the rates are lower than other HY CDs and can only be locked in for 11 months. The rates are still better than a savings/mm account but the funds aren't as quickly/immediately available. If you're worried premature withdrawals may become a reality then I'd suggest putting some money into a No-penalty for peace of mind.

Yes, MM funds are most-immediately available via the debit card. Keep in mind if you need to transfer money from your Ally Savings into your MM it's immediately available but you need access to an Ally recognized phone/computer.

The reason for not putting all my funds into CDs is just a matter of preference. I prefer to have a mix of options, partly hedging and quick access to funds for other opportunities. On the other hand HYCD rates haven't been this high since 2010 so it's a unique opportunity. On the other other hand if you put all your funds into long term CDs and need to early-withdraw your interest penalty could cancel out the additional interest accrual of a CD over a Savings/MM, which is immediately accessable.

To start I suggest you open a Savings and MM asap. It will take your current bank around 3 days to transfer your funds so you're looking at next week. In the meantime use one of the CD interest calculators on Ally or elsewhere to compare numbers, timing and determine what feels best for you.


clong55 OP t1_jefvjp8 wrote

very helpful to learn about different perspectives!

Another quick question about CDs, what happens after the term is up? Do we have the option to renew the term, or do we have to move everything out of the CDs?


AllTheyEatIsLettuce t1_je8f99v wrote

High yield offer will get you a few more dollars in interest if you take the 12 mo. option vs. the no penalty offer of 11 mos. only. Your timeline; your call.


According-Item-2306 t1_je8rq3x wrote

To make you feel better, up to 1 year ago, you were not missing much by having your money in a checking account as interest were very very low