Ally Bank Review – GMAC Bank 2.0 or Real Change?

My blogging buddy Mike dragged me kicking and screaming until I agreed to write this Ally Bank Review. I just finished writing a very extensive review of another online bank which I fell in love with. Who needs two banks? Am I right? Of course I am.

But Mike was undeterred. He felt that in the interest of fairness, I should give Ally Bank a good look too. I’m glad Mike persisted. I found a few interesting tweaks and wrinkles.

As you’ll see, Ally Bank is a fantastic choice for the right person. But (also as you’ll soon discover) it’s a terrible choice for the wrong person. Let’s dive in.

Ally Bank History

Ally is the reincarnation of GMAC which was a financing company owned by General Motors. GMAC took in deposits but didn’t make convention loans or sell mortgages. Instead they used the money to finance auto sales for GM dealers. This was all on the up and up. Completely Kosher and really wasn’t a problem….until it was.

When GM went south, GMAC (which was a completely independent company) reinvented itself to lose the bad vibes associated with GM. They also morphed into a bank in order to tap into $5 billion from the Troubled Asset Relief Program (TARP).

What came out of this process was Ally Bank. A completely online, FDIC insured institution. Today, they offer some of the highest rates available for checking, savings and CD products. Are they a bank worth using? Let’s see.

Safety

With a history like that, safety is a prime concern. Fortunately, Ally is FDIC insured as I said. This means your deposits are insured up to $250,000. You can actually multiply that insurance coverage by naming a combination of different people in your household as owners of the accounts. But we’ll cover that at a different time.

For now, you can assume that money with Ally is as safe as it would be with any other FDIC insured institution. In my opinion, that means it’s pretty safe.

Besides security for your money you also have to consider the safety of your information of course. Ally Bank seems pretty tight on that department too. They use Secure Socket Layer (SSL) encryption and that’s a nice way to keep the bad guys away from your data.

I did a thorough search for complaints and didn’t find a single whimper when it comes to security. That’s a good place to start if you ask me. (I did find some other customer grumbles but we’ll cover that in a bit.)

With safety and security handled, let’s move on to the value offer and see if it’s real or just a mirage.

Interest Paying Checking

Ally Bank delivers the goods when it comes to checking. You don’t need to meet any minimum balance requirements to open the interest bearing checking account and they don’t charge monthly fees to keep your account open. I’ll get in the sand box and play with people like that any day.

They also dish up free online banking, mobile banking, free bill pay and free checks (if you order them from the bank). They also give you a free debit card and you can write as many checks as you want without paying a cent. Joy.

Are you afraid they’re going to sock it to you when it comes to using your ATM card? Think again. It’s free. And if you use a machine in the United Stated and get charged, Ally will reimburse you automatically. No muss. No fuss. No bother.

Oh…and did I mention that you’ll earn some sweet interest on your checking account balance too? That’s fresh!

Of course the interest rate changes all the time but Ally is known for being very competitive. As of 3.26.2013 here is a snap shot of what they are paying right now:

As you can see, it’s certainly no king’s ransom. But it’s more than most banks pay so I’ll mark that up as a plus for Ally Bank.

Fees for Checking

Ally offers a lot of great services without charge. But there are a few items that cost money and you should be aware of these expenses.

• Overdraft Items (paid or returns) – $9.00
• Stop Payment Item $15.00
• Return Deposit Item $7.50
• Outgoing Wires – $20

Most of these fees seem reasonable. The only thing I don’t understand is why they don’t offer overdraft protection.

Ally does make it simple to link your accounts to other accounts both within and outside the institution as you’ll see below. Why not set up an overdraft account and allow us to link to that as well? (I think I figured out the reason for this and I’ll share my brainy thoughts in the summary.)

The website spells out six ways to move money:

1. You can move funds between any two Ally accounts
2. You can register other accounts (outside of Ally) with Ally and move the money electronically from the Ally site.
3. You can scan or take a picture and submit your deposits via email or an iPhone or Android app.
4. You can use Direct Deposit.
5. You can wire the money (for a fee).
6. You can send the money in using the U.S. Mail

Money Market Savings & High Yield Savings

Money market and High Yield Savings accounts have all the bells and whistles of interest bearing checking accounts.

The only difference between these two accounts is that the money market includes a debit card and the high yield savings doesn’t. No big deal. Since there are no account minimums or account maintenance fees with the money market and high yield savings, this is especially sweet. But there are two differences between these accounts and the regular checking account:

Money Market Savings and High Yield Savings pay more interest than regular checking accounts.

By Federal law you can only have up to 6 electronic, telephone and/or check transactions per month. If you exceed that number you’re going to get smacked for $10 a pop.

Of course you can make as many deposits as you like and you can use the ATM to your hearts delight. But watch those check, electronic or phone withdrawals please.

Raise Your Rate CD

If you are willing to lock up your money for 2 or 4 years Ally has some interesting ideas for you. They’ll let you raise your rates (one time for a 2 year CD and 2 times for a 4 year CD). That means if interest rates go up, you can jack up your rates rather than stay stuck with a gutter ball. STRIKE!

CD Guarantees

All the CD products come with Ally’s “ten day best rate guarantee”. The benefit is that if rates go up on the product you buy within 10 days of opening your account, you’ll get that higher rate automatically. I don’t think this is such a big deal personally. Lately, rates have not changed all that much and when they have it’s usually down.

This is definitely more of a marketing ploy than a substantial benefit to consumers if you ask me. Still…..I suppose it’s better than a sharp stick in the eye……I guess. Let’s continue our tour of Ally Bank’s products.

No Penalty CD

Ally also offers a “no penalty” CD. If you buy one of these CDs you can withdraw your money anytime without incurring a penalty.

While this sounds lovely, like the “10 day rate guarantee” it’s actually about as interesting as a soggy bowl of Corn Flakes (no offense Kellogg Company). I say that because the rate they offer for these CDs is below the money market rate.

That being the case, you might as well keep your cash in the money market. You’ll earn more interest (a tiny bit) and the money is still liquid.

The only time a no penalty CD would benefit you (as opposed to simply depositing the money in a money market) would be if rates drop. If that happens, the money market rate would indeed fall but the CD would still pay the higher amount.

But with rates as low as they are now (hovering pretty close to 0) that’s almost a physical impossibility. Sorry Ally, I’m not buying this “no penalty” jazz either.

If you have a CD with Ally Bank and it matures, you will receive an extra .25% bonus when you roll it over to another CD. This bonus is running through the end of March and I can’t say if they are going to continue it.

Again, this is a loyalty reward and it kicks in when you renew your CD, not when you open one the first time. Sorry.

Retirement Accounts

With Ally, you can open an IRA, Roth IRA or SEP IRA for you under most of the same conditions stated above. I find that helpful. Frankly I’m shocked that all online banks don’t offer this. But at least it’s nice to know that the people at Ally do. OK…..I forgive them for the nonsense with the “10 day guarantee” and the “no penalty CD”.

Customer Service

I called the bank and by pressing 0, I immediately got connected with a friendly and knowledgeable Ally Rep Kathy. I noticed that you can call 24/7, 365 and I really value that accessibility.

Back to Kathy. She answered all my questions and demonstrated a real understanding of the ins and outs of what Ally offers. I like talking to smart people. If you don’t like talking to people, you can always access your account information online anytime as well.

You can see your balances and transactions naturally. But you can also download up to 13 months of account statements, check images and your most recent 1099.

As I said above, Ally Bank gives you access to your cash at over 400,000 ATMs throughout the United States. They never charge you for using the machines and if the naughty machine you use does charge you, Ally will reimburse you and keep a smile on your face.

Email Reminders – Many times people park money in accounts and just forget about it. That’s a costly mistake that Ally doesn’t let you make. If they notice that you could be earning more interest by using a different account (based on the number of transactions you execute) they’ll send you an email and suggest ways to earn higher rates. Thoughtful and kind.

What I Can’t Stand About Ally Bank

Generic Belly Aches My wife tells me that if I have nothing nice to say, don’t say it. Of course she is right. But it’s my JOB to say negative stuff if I find it when I’m writing a review. Forgive me wifey. Here’s what doesn’t sit well with me about this bank:

• CD’s Automatically Renew – Some people like this feature because it saves them time. But I don’t like it one bit. I think banks should get my permission before they renew my account. Most banks do this automatically and it boils my tea. Sadly, Ally Bank does this as well. That means if you don’t contact the bank within 10 days after your CD matures, it will automatically renew for the same period at the then prevailing interest rates. Yuk.
• Opening an Account Might Drive You Insane and Then Postal – If you do business with any online bank, you might actually lose your marbles during the account opening process. You must be very patient. Here’s why it’s a problem across the board. Online banks have to compete fiercely for your business. They do this by offering higher rates and it costs them quite a bit to acquire new clients. They try to make up for those extra costs by cutting their own expenses. As a result, they systematize as much as possible and take extra precautions when it comes to risk.

With a bricks and mortar bank, you can meet the people and explain your situation to them. As long as you don’t look like a “perp”, they will make some calls to verify what you are saying and this could expedite the account opening process.

Not so with online banks. Online banks have to go the extra mile when it comes to checking you out because they rely on their system and they don’t make any “exceptions” or allow for “special circumstances”. Lots of scammers try to open up bogus accounts with online institutions so banks learned to be wary.

95% of the complaints I find about online banks has to do with the account opening process and I’ve explained why this is arduous. It just goes with the territory. Expect delays and frustrations when you first start off with Ally – or any online bank.

What I don’t like specifically about Ally Bank

• No Business Accounts – Ally only offers personal bank products. That’s fine if you don’t own your own business. But if you do, it’s nice to do all your banking with one shop. Ally makes that impossible. Whah.
• No Overdraft Protection – As I said above, many banks allow you to link your accounts to an overdraft account to cover you just in case you go a little crazy with the check writing. Ally doesn’t do that. Instead they charge you $9 for each overdraft item up to a maximum of $9 per day.

I don’t know for sure why this is, but my sense is they do this because they like earning those overdraft fees. I can’t explain it any other way. This is a business decision they have made that is in their interests rather than in the interests of the consumer. That makes me sad. 😳

• FICO Score – Unlinke any other bank, Ally runs a credit check on you before they agree to open your account. They do this in order to reduce their risks. If you think about it, this might be the reason they pay such high interest rates. If they are successful in weeding out the risky customers they reduce their losses. Then they can pass those savings on to depositors like you. Not so bad.

So the credit check doesn’t bother me per se but you should be aware of it. If you don’t have much credit history or you have poor credit, these guys might not be fun playmates.

• “10 Day Rate Guarantee” and “No Penalty CD” – As I explained above, I think these features have little to no value and they are somewhat manipulative. It makes me wonder what else these guys have behind the curtain. It makes me feel on guard. Not my preferred way of doing business.

What I love About Ally Bank

Let’s not throw out the baby with the bath water. There is plenty to love about these blokes:

1. They offer extremely competitive rates. And I really love that they pay interest on checking accounts. I compared Ally to a few other online banks that are known for also paying good interest. Ally stacked up pretty well across the board. In some cases the differences were large. In other cases the differences were microscopic. But at least Ally consistently pays well.
2. Ally doesn’t have a long list of items they charge for. They keep it simple and reasonable. I like it.
3. No account minimums and no account maintenance fees. What’s not to like about that?
4. The bank will provide you with free checks. That’s zesty if you ask me. I don’t know of any other bank that does this.
5. You can use bill pay for free. I love using bill pay because it saves me time and it helps me make sure all my bills are paid on time. Some banks charge you for this or demand that you keep a minimum balance in order to get this service for free. Ally does neither. They make it easy and free to use bill pay and I appreciate that.
6. I like the email suggestions they send encouraging you to take advantage of higher rates they offer. I find that refreshing and good business sense.
7. The “Raise Your Rate” CD is nice. Of course it’s difficult to pinpoint the exact best time to implement these features but at least they do offer the alternative.

Bottom Line

Ally is great if you have good credit, don’t have a business and have less than $5,000. Above $5,000 there are better online banks that will provide all these same services for free plus provide extra guarantees that make it easier and faster to do your banking. If you have a business account, it makes even more sense to look at Everbank.