Ally Bank just raised the rate on its high yield savings account from 2.75% to 3.00% APY.
That makes the latest in a string of rate increases from Ally and other online banks, as savings account rates continue upward following continued Federal Reserve interest rate hikes. Most recently, the Fed make its sixth rate hike this year, pushing the target federal rate range to near-4.00%. Ally now joins a few of the top high-yield savings account rates in crossing the 3.00% threshold.
Subsequently, experts predict interest rates on savings accounts will only continue to increase through the rest of 2022.
How Much Can You Earn with Ally’s 3.00% APY?
Let’s say you have $10,000 reserved as an emergency fund in an account with Ally.
At the previous 2.75% APY, you could earn about $275 in interest over a 12-month period. With the new 3.00% APY, the same balance and year-long period could net you $300 in interest payments.
That may not seem like a lot of money in the long run, especially considering the large $10,000 example balance. But compare that to the current national average savings interest rate of 0.24%, which is more in line with what you’d find at a traditional national bank with physical branches. With the same $10,000 in a traditional savings account earning that average, you’d only increase your earnings by $24 over the course of a year.
Now consider you have $10,000 in your account today, and you can contribute an additional $100 per month over the next year. Here’s how much you could earn by the end of the year by earning 3.00% APY, compared to making no additional contributions, and by contributing the same amount with the national average 0.24% APY.
|Ally Bank 3.00% APY||Ally Bank 3.00% APY plus contributions||National Average 0.24% APY||National Average 0.24% APY plus contributions|
|Starting Savings Balance||$10,000||$10,000||$10,000||$10,000|
|Total Savings Balance After One Year||$10,300||$11,516||$10,024||$11,225|
For more comparison, here’s a look at the current yields offered by other banks on our list of best savings account rates:
Best Savings Account Rates
|Salem Five Direct||3.50%|
|Lending Club Bank||3.25%|
|Prime Alliance Bank||3.25%|
|Live Oak Bank||3.10%|
|American Express National Bank||3.00%|
|Goldman Sachs Bank USA||3.00%|
Why We Like Ally Bank
- Competitive interest rates
- Ally will automatically raise your rate if interest increases within 10 days of opening your CD
- Unlimited withdrawals from AllPoint ATMs and up to $10 monthly reimbursement for other ATM charges
- Full-service banking with a variety of deposit and lending products
- Online tools for budgeting and saving
- Minimum deposit and fees may apply for investing tools
- Cannot make cash deposits
- No credit card options
- Fewer accessibility initiatives than some other banks
- Savings buckets to separate savings for different goals
- Savings boosters can help you regularly add to your savings balance
- Traditional, no-penalty, bump-up, and IRA high-yield CDs
- 10-day rate guarantee for new CD accounts
- No monthly maintenance fees
- No minimum balance requirements
- Access your accounts online or via Ally’s mobile banking app
- Interest checking account available with debit card
- Home and auto loan options, plus personal loans for medical costs and home improvement
- Automated investment portfolio management
- Ally Bank deposits are FDIC insured
Ally Bank is among our favorite banks for high-yield savings thanks to its great customer service and because it consistently offers one of the top APYs on the market. There are no monthly maintenance fees and no minimum balance requirements to open or maintain your account. Ally also offers a bucketing feature that allows you to dedicate different amounts in your online savings account to different goals, like an upcoming vacation, down payment on a home, or an emergency fund.
In addition to its high-yield savings account, Ally offers CDs, an interest-earning checking account, investment and retirement funds, and even loans.
However, we also believe that all the banks in the table above and on our list of best high-yield savings accounts make for great places to store your cash. Each of these banks offers low or no minimum deposit requirements, no monthly fees, and APYs among the highest available right now.
What’s most important is to find a bank with the features best suited for your needs (mobile app access, unlimited withdrawals, savings tools, etc.) and start saving. You can set up automatic transfers to your savings whenever you’re paid to make the process even easier. Then, you can focus on other financial goals like paying down debt or buying a home.
Why Are Interest Rates Increasing?
In an effort to combat runaway inflation and other economic factors, the Fed began raising interest rates earlier this year, and will likely continue rate hikes through the near future.
Online and traditional banks typically base their interest rates on the federal funds rate set by the Fed. That’s true for the APRs they charge borrowers (credit card interest, mortgage rates, and more) and the APYs they pay customers on their deposits into savings accounts or CDs.
As the Fed continues to raise the federal funds rate, you can expect APYs on savings accounts, as well as money market accounts and CDs to increase as well. Experts say now is the time to make sure your savings are in the best account to help you meet your goals.
Just remember, these rates are still marginal. Even the best high-yield savings accounts only earn about 1% on your balance. They’re a safe, reliable way to store short-term or emergency savings, but they’re not a good vehicle if you’re looking to build wealth. For longer-term investments and retirement savings, it’s smart to diversify your portfolio with investment accounts like index and mutual funds, and retirement accounts like a 401(k) or Roth IRA.