Should You Use Ally Bank?

I’m sure you might have heard of Ally bank. Truthfully, I haven’t heard of it since last year. I didn’t know much about it, haven’t seen a location, and don’t know of any of their ATMS. If you’re like me and just hearing about it, welcome to the club.

Maybe a reason why you haven’t heard of it is because it’s an online bank. Yup, you heard that right. Online.

So back to the main point. One of the most interesting things that drew me to ally banks and start banking with them is their savings account.

First big benefit. They offer one of the highest yields on savings accounts in the nation. At the time of this writing they’re offering 4.45% APY. Money compounds daily so that’s a pretty good deal especially if you have money just sitting around.

To put the yield into perspective, I have a friend who was sitting on $300k waiting to buy a house. But since the market is just absurdly expensive, he didn’t jump on buying a house. Instead he took the money and threw it into a high yield CD. If I’m not mistaken he said it was roughly 4.45% as well. And with that $300k sitting pretty, he was generating $1000/m just for having his money sit. And yes, $300k is a far cry from pocket change to buy a house, but that’s what they had saved since being on the fence of buying a house.

Now personally what I would do in his scenario is throw it into a savings account instead of the CD. While yes the CD is a fixed and locked amount, the term to hold the CD is as well. So imagine if you were in a pinch and needed cash. It would be harder to pull your money out just like that with a CD than it is with a savings account.

Even if savings accounts are limited to the amount of transactions that can be processed in a monthly statement(federal laws) I would still consider it a “liquid investment” meaning you can pretty much always pull your money out whenever you want and need.

Downside I can think of on the top of my head is that the rates aren’t fixed/locked so if you’re projecting having XYZ amount of money earned in dividends from your savings account balance, I wouldn’t be too hopeful about it. But then again, in the current market environment where the rates just keep going up, I don’t see the rates going lower any time soon. And besides, I don’t think rates can switch from 4% to 0.01% in a short amount of time.

The next big benefit aside from the awesome yield is “savings buckets”. It’s a savings account tool to set goals for specific reasons/purposes. Let’s say you want a savings account to build towards a car. But then you also want to have an account to save for a rainy day fund. But then you also need to save for yours or your kids college fund. I’m sure you can think of any creative way to find something to save. Basically the savings buckets are like having an account within accounts.

Now you don’t need to make multiple accounts with different banks just to have separate savings funds. Now it can all be in one place, and truthfully it’s kind of fun. The UI of the platform is engaging and it actually makes me want to save. The fact I can see my defined savings goal and amount progress, it motivates me more to save so I can close in on my end goals. It’s almost like a video game truthfully. And opening an account is super easy. It took me roughly 5mins to set up my savings account with them.