Want a 5-Year CD Rate without the 5-Year Commitment? Ally Bank Offers Low and No Penalty CDs

Getting a high interest rate these days is tough; most APYs offered for traditional deposit accounts can’t even keep up with inflation. In order to get the highest interest rate available, long-term CDS usually offer some of the best options. But what if you don’t want the long-term commitment because you either may need to withdrawal some or all of the money, or you want to see if interest rates may go up? Good news: there are low-penalty and no-penalty CDs on the market that will allow you to earn that higher interest rate without much (if any) penalty for early withdrawal.

Ally Bank, for example, currently offers a 5-year CD that pays 2.33%. If you invest $50,000, your estimated earnings at the CD maturity is approximately $6,100. What if you need to withdraw your money at during year four? No problem; this CD is a low-penalty CD so you’ll only lose the equivalent of 60 days interest. You never lose any of your principle, and your deposit is always FDIC insured up to federal limits. So, if you withdraw your principal at month 48 instead of month 60, you’ll just lose the interest for months 46 and 47—all the while earning the higher 2.33% APY for months 1-45.

Ally also offers a no-penalty CD that pays 1.13%. The term for that CD is 11 months, but you can withdraw your entire principal and all of your earned interest with no penalty whatsoever, at any time. However, keep in mind that if you do make an early withdrawal, it must be for the full balance and all interest earned. This no-penalty CD is not like a savings account, meaning you cannot make additional deposits or withdrawals. Once you open the CD for your funded account, that’s the way it stays until either it matures or you withdraw the entire amount with interest. However, there are no fees to open or maintain the CD, and there’s also no minimum deposit required.

If you’re afraid APY offers going up after you’ve funded your CD, you may want to check out the Ally Raise Your Rate CD. This product offers both 2 and 4-year CDs, and you have the option of increasing your rate once with their 2-year CD or twice with their 4-year CD. You’ll get a personalized Rate alert to let you know when the rate goes up, and when you open or renew your CD, you get the Ally Ten Day Best Rate Guarantee. That give you insurance that you will get the very best rate Ally offers during the first 10 days of your CD opening or renewal. Like other Ally CDs, there is no minimum deposit, no monthly fee, and interest compounds daily. Currently, the 2-year Raise Your Rate CD pays 1.39% APY and the 4-year pays 1.98% APY. If you choose to withdraw a Raise Your Rate CD early, the penalty is calculated using the interest rate in effect on your account on the day you request the early withdrawal. This account, like Ally’s regular CD, only penalizes you 60 days interest.

Although it’s difficult to maneuver financially and earn high interest rates in this economy, it’s nice to know there are some products available on the market that offer you some flexibility—without steep penalties.