Ally Bank Just Cut Interest Rates AGAIN. Here's What It Means for Your Savings Account
Ally Financial customers awoke to yet another dreaded email Wednesday: Interest rates on the online bank's high-yield savings account have dropped for the second time in just over a month.
The financial institution, which was recently named Money's Best Online Bank for the second year in a row, dropped its annual percentage yield (APY) on online saving accounts from 1.80% to 1.70%, the bank announced in an email to customers. The change in Ally savings account interest rates is effective as of Nov. 13, the email says, and will be reflected in customers' account details on Nov. 14.
"This 0.10% APY decrease means you’ll earn at least $5 less in interest a year for every $5,000 in your account," reads Ally's email explaining the changes. "Interest earnings are always nice to have, but your savings strategy shouldn’t rely on that alone."
Mind you, as recently as June 2019, Ally's online savings account APY was 2.2%. So in less than half a year, interest rates have decreased by one-half of a percentage point. If you had $10,000 in an account with a 2.2% APY, you'd earn $220 in interest over the course of a year. With a 1.7% APY, however, that account would earn $170 over 12 months.
While Ally customers might be upset that their rate has, yet again, been cut, at least they're not alone. It's not unusual for APY on savings accounts to drop in the wake of interest rate cuts, like the Federal Reserve's cut to interest rates at the end of October. Rates dropped at Ally, as well as Goldman Sachs' Marcus account and savings products at Betterment and Wealthfront, according to the Wall Street Journal, after the Fed cut interest rates in September.
While less interest on a savings account is never a good thing, Ally customers can take solace in the fact that an APY of 1.7% is still a better rate than most. The average savings rate is just 0.09%, according to the FDIC.
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