Loyalty bonus makes Ally’s 4-year CD worthwhile

Yields sign with arrow pointing up and dollar sign

I’ve finally broken down and opened a 4-year Raise Your Rate CD at Ally Bank.

This certificate of deposit, permitting a customer to bump-up the rate twice over its term, has a lot to recommend it.

First, Ally is among the top tier of online banks in terms of customer service.

Its website (www.ally.com) is easy to navigate, and its customer service representatives, in my experience, are friendly, knowledgeable and helpful.

And Ally has always been creative, coming up with new products, like the Raise Your Rate CD, for deposit customers.

You’ve also got to like the TV ads with the cute kids and the obnoxious adult.

Nevertheless, Ally’s rates have sagged lately, including both 2-year and 4-year RYR CD rates.

I’ve previously written that I have a slew of the 2-year CDs.

Rates have done nothing but decline since I established them, and I’m sure I’ll never get to raise my rate.

The 4-year CD offers a much greater chance for a bump-up, if for no other reason than its term extends beyond Ben Bernanke’s tenure as Fed chairman (which ends in January 2014).

But I haven’t been willing to put new money into one because the rate has steadily declined to well below 2% (it’s 1.80% APY currently).

This just isn’t high enough for that maturity, even with two bites at the step-up apple.

However, one of my 2-year RYR CDs just matured, and I was entitled to the bank’s 0.25% loyalty bonus for keeping my money in an Ally CD.

The reward produced an initial 2.05% APY for the 4-year CD, and that was sufficient to convince me to go for it. (The starting rate could go higher, under Ally’s "10-day best rate guarantee," but I’m not holding my breath.)

The bad news is that the quarter-point bonus the bank has been offering to keep existing customers in Ally CDs is set to expire Sept. 30.

The representative who handled my transaction said the bank had extended the expiration date of the bonus offer in the past and might do so again.

I can only hope.

From my standpoint, the loyalty reward turns Ally CDs, at all maturities, from just so-so time deposit accounts into attractive investments.

In fact, maybe Ally should not only keep the current bonus for CD reinvestments, but extend it to new money CDs opened by existing customers.

Now that would be creative.

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