Online bank: A good deal?

If anything good comes from the enormous credit, mortgage, and banking mess of the last two years, it’s that new models of business may emerge. Customers will flock to the companies that solve their problems and make their lives easier.

In the banking world, that means lower fees and higher interest rates. One bank has already begun to lead the way. In 2009, GMAC Bank rebranded itself with a new name and a new way of doing business:

It's now Ally Bank. A wholly owned subsidiary of General Motors Corp., GMAC Bank was originally founded in 1919 to provide GM (and later Chrysler) dealers and customers with financing. 

These days, Ally Bank is open to all customers, offering its services exclusively online with no physical branch locations. With its new facelift, Ally Bank has positioned itself as the call of the future for consumers.

According to GMAC Chief Executive Officer Al de Molina, “We are launching a new brand with a new approach of treating customers with total transparency. Unlike other banks which depend on fees as a business model, we want to make money with customers, not off customers.”

If you’ve ever been hit with multiple overdraft fees in one day, this bank’s fee policy will seem a breath of fresh air.

Reasonable Fees

Check out these fees and decide for yourself if they seem reasonable:

• Free checking and savings accounts – no monthly fees
• Free debit card
• Free ATM access (reimburses charges from other banks)
• Free standard checks
• Postage-paid deposit envelopes
• Free cashier checks
• Free overdraft protection link between accounts
• $9.00 charge for overdrafts (per day, not per incidence)
• $15 stop payment charge
• $7.50 returned deposit item

Furthermore, Ally Bank checking and savings accounts require no minimum deposit to open an account and no minimum balance or direct deposit requirement to maintain a fee-free account.

Ally Bank is Member FDIC, which means deposits are fully insured up to $250,000 per depositor (at least until 2013, when the insurance limit may drop back to $100,000 for all banks).

CD Rates

Over the last year, many banks have dropped savings and CD rates precipitously. In light of volatile stock and bond markets, this has left conservative consumers little choice in trying to stash money in an account earning enough interest to at least keep up with inflation.

Compared to the rest of the field, Ally Bank has put up some very competitive interest rates. The current rate for a two-year Certificate of Deposit (CD) is 2.09%, with a 10-day rate guarantee. This means that within ten days of opening or renewing an Ally account, you automatically get the best rate the bank offers during that time period.

Better yet, with the two-year CD, you have the flexibility to raise your rate once if the bank offers a higher rate during the term of your CD.

For a somewhat lower rate (currently 1.29%), you may purchase a no penalty CD, wherein you may withdraw the full balance, including earned interest, at any time without incurring a fee.

Money Market Rates

Ally’s money market account current pays out 1.49% in interest and offers a few unique perks of its own. You may open an account with no deposit, there is no minimum balance, no monthly fee, you receive a free check card and free checks, and may use ATMs at any bank and be reimbursed any fees charged at the end of your monthly statement period. Like other money market accounts, you may conduct up to six transactions per month as set by federal law.

Interest on Ally Bank savings, CD, and money market accounts is compounded daily, which means money appreciates faster than it would in bank accounts that compound monthly, quarterly, or annually.

Checking & Savings Rates

Currently, an Ally online savings account is offering an interest rate of 1.49%, which helped earn it “Best savings account” on Kiplinger’s 2009 Best List in credit and banking. Even the Ally  checking account earns .50% in interest (1.15% on balances of $15,000 or more). 

Reputation

Consumer comments regarding customer service appear to be quite positive. The bank boasts 24-hour live customer service representatives who are reputedly knowledgeable and helpful. The only consistent negative reporting is with regard to delays obtaining money from an expired CD, but in many cases these complaints appear derived from consumers who didn’t read the account direction on when to request a withdrawal at the end of the term—typically the same instruction across all banks.

However, the most controversy the bank has stirred up appears to be concerning it’s commercials, whereas adults are depicted as duping children with a bait and switch ploy (one child gets a plastic horse, whereas another gets a real horse). Although the ads are designed to poke fun at other banks that engage in this practice, the use of children in the ads has not been well received by many viewers.

The Simplicity of Earning More & Paying Less

It would appear that Ally Bank’s strategy is simply to give people what they want, and they will flee from their current disgruntled situations and open accounts at Ally. In other words, it’s the Wal-Mart philosophy: What the bank may lose in fees and interest paid out it will gain in volume sales.

In a down market when people are being careful with their money and disgruntled with hidden and exorbitant penalty fees, it’s good to know there is an alternative model borne from the ashes of the banking crisis.

For more information about Ally Bank, visit the links below.

Resources:

• Ally Bank, 1-877-247-ALLY
• http://www.hoovers.com/company/Gmac_Bank/
• http://www2.fdic.gov/idasp/

One of the above mentioned Ally Bank commercials:

Kara Stefan is a freelance financial writer and author of Head of Household: Money Management for Single Parents. You can find her at Linkedin or Kara Stefan Communications.