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An online bank has an attractive offer: A high-yield 11-month CD with no early withdrawal penalty.

With a no-penalty CD from Ally Bank, you can withdraw savings and interest free of charge within days of funding your account. As far as certificates of deposit go, that’s virtually unheard of.

Consider it an alternative to a traditional savings account.

Savers depositing at least $5,000 can earn 1.25 percent APY. Fund your CD with less than that amount and your annual percentage yield drops to 1.15 percent.

High rollers stand to benefit the most. You’ll earn 1.5 percent APY with a $25,000 minimum deposit.

The catch

Ally’s no-penalty CD comes with a couple of caveats. For one thing, you can’t make additional deposits. If you’re trying to make saving money a regular habit, opt for a standard savings or money market account instead.

You’ll also be stuck with a relatively low yield in exchange for being able to withdraw your savings without paying a penalty. The best 12-month CDs pay over 2 percent APY.

 Top nationally available 12-month CD rates
Bank APY Minimum deposit
Live Oak Bank 2.10% $2,500
My eBanc 2.05% $5,000
VirtualBank 2.05% $10,000
First Internet Bank of Indiana 2.02% $1,000
XCEL Federal Credit Union 2.02% $500

Another issue is the fact that you can’t make partial withdrawals. You must claim all of your savings at once or leave them in your account until it matures.

One way to get around that rule is to open multiple no-penalty CDs. There’s no limit to the number of accounts you can have.

Other terms and conditions

Beginning with the seventh day after you make an initial deposit, you can withdraw funds at any time. There’s no minimum balance you need to earn interest and no monthly service fees. Interest compounds on a daily basis.

As with most of Ally’s CDs, there’s a 10-day best-rate guarantee attached to the no penalty account. If the yield increases within 10 days of opening and funding your account, you’ll qualify for the new rate (depending on your account balance).

Compare this deal to other top CD offers. Then calculate how much interest you could earn when your account comes due.

How to purchase Ally Bank CDs

There are several ways to buy Ally Bank CDs. You can fill out an application online, mail one in or open an account over the phone.

To qualify for a CD you must:

  • Be at least 18 years old
  • Be a U.S. citizen or legal permanent resident
  • Have a Social Security number or taxpayer identification number
  • Have a U.S. street address

Initial deposits must be made within 60 days. Otherwise, the bank will close your account.

To fund your CD, you can transfer money from another bank account, mail a check or initiate a wire transfer. You can also deposit checks online or through Ally’s mobile app.

After your no penalty CD matures, there’s a 10-day grace period. If you don’t want your account to automatically renew, you can move your savings to a different account or request a check.

About Ally Bank

Ally Bank is headquartered in Midvale, Utah. In addition to loans, credit cards and banking products, customers have access to free online personal finance courses and local events.

The online-only institution earned four out of five stars on Bankrate’s latest Safe & Sound Ratings, which measures the financial health of banks and credit unions throughout the United States.