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Ally Bank Changes CD Withdrawal Policy

Written by Nickel - 5 Comments

Ally Bank Changes CD Withdrawal Policy

According to Ken over at DepositAccounts.com, Ally Bank has changed (or at least “clarified”) their CD early withdrawal policy. As I’ve noted several times in the past, Ally CDs have been particularly attractive due to their low 60 day interest penalty for early withdrawals.

When this policy was combined with their rather competitive rates, Ally’s CD rates looked a heck of a lot better than the best available online savings accounts. But with this change… Not so much.

So what exactly has changed? Well, they’ve modified the language to state that:

If we consent to the redemption of a CD or IRA CD prior to the maturity date, we will close the CD and impose a penalty. The penalty amount will be equal to the loss of 60 days interest calculated at the interest rate in effect for the CD or IRA CD at the time the redemption request is made.

The “if we consent” bit is new.

As you may recall, we’ve talked about the possibility of banks changing their CD policies in the past. At that time, Ally had offered assurance that they would honor their current policies for all existing CDs and that if any changes were made, they would happen with 30 days notice and only apply to new CDs.

In this light, it’s worth noting that a reader of Ken’s original post had contacted Ally and was advised that this was not a change, but rather a clarification of an existing policy. Be that as it may, it’s unclear why they felt a need to “clarify” their policy at this time unless they foresee the need to refuse CD redemptions.

Until this is cleared up, I can’t recommend buying CDs from Ally if there’s any chance that you might want to take advantage of the 60 day interest penalty for early withdrawal. While I’m sure that Ally isn’t the only bank to have such language included in their terms and conditions, the recency of this addition feels a bit ominous.

Published on October 26th, 2012
Modified on October 27th, 2012 - 5 Comments
Filed under: Banking

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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5 Responses to “Ally Bank Changes CD Withdrawal Policy”

  1. 1
    BG Says:

    The change makes it sound like they now have to approve the early CD redemption, whereas before, you could always early redeem and pay the 60-day penalty.

    I don’t like the wording change, but it does bring the wording more in line with the typical weasel bank’s contacts (you buy a five year CD, be prepared to hold it for five years).

    Come on Ally, what about your promises to not have stuff like this in the fine print?

  2. 2
    Mike B. Says:

    It actually really is a clarification — the fact that they had discretion whether to allow an early withdrawal was elsewhere in the contract when I looked a year or so ago. Moving it to this section makes it clear(er) rather than hidden.

    Admittedly it’s worth noting they made it clearer rather than removing it with this update, but it’s not as if their ability to veto comes out of nowhere.

    Most other banks do the same, or at least have the right to delay the withdrawal by a certain amount of time if it stresses their cash flow.

  3. 3
    Nickel Says:

    Mike: I just reviewed an older version of their deposit agreement and didn’t see anything about this elsewhere in the agreement. Of course, it’s possible that I’ve missed it. Can you point out the specific language that relates to this in their older agreements?

  4. 4
    Isabel C. Says:

    I closed an Ally CD account early earlier this year and customer service was nothing but nice about it. I believe that banks should have the right to deny this sort of request (a CD is supposed to be a long-term commitment, after all). Furthermore, just because they can doesn’t mean they will exercise this power all the time. I would still recommend Ally since objectively, they have the best rates I’ve seen in a long time and subjectively, I’ve always had a great experience with customer service no matter what I was contacting them for.

  5. 5
    Rich Says:

    I agree with Mike’s comment Ally’s “discretion whether to allow an early withdrawal was elsewhere in the contract”.
    My June 18, 2011 Deposit Agreement in C. General Rules Governing deposit Accounts, item 33. Change in Terms says “we reserve the right to delay, discontinue or make changes to accounts …”.
    To me that says Ally could delay an early CD withdrawal for weeks or months, up to maturity. A “delay” is not refusal, ha ha.

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