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Thread: Ally Savings Account

  1. #1
    sugary
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    Default Ally Savings Account

    is already dropping its APY fast, down to 1.3 APY.

    Mint.com is suggesting I save more money by switching to Capital One, at 1.45 APY.

    Where do you have a savings account? What are some things I should consider? Should I keep switching over to better offers?


    -"Turned 23 Yesterday"

  2. #2
    God/dess hockeybobby's Avatar
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    Default Re: Ally Savings Account

    Are you debt free?

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    Banned Melonie's Avatar
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    Default Re: Ally Savings Account

    In case you weren't aware, Ally Bank is a newly formed 'front company' for GMAC. The high CD interest rates offered by Ally Bank were arguably the result of the gov't making 'zero interest' TARP loans to GMAC. Now that the TARP spending is being reined in, expect more 'market based' CD interest rates to be paid.

    In my own case, where 'cash' investments are concerned, I'm partial to CD's that are denominated in currencies other than the US dollar ! I just rolled over some money into a Swiss Franc denominated CD ... which pay squat for direct interest, but which offers the opportunity for 5%+ capital gains thanks to the probable strengthening of the Swiss Franc / weakening of the US dollar over the next few months.




    I would also point out that ALL financial instututions which offer FDIC / NCUSIF insurance for depositors are now being hit with huge increases in insurance premiums. For example, from less than 0.1% of deposits in 2007, 2010 insurance costs have risen to 0.4% of deposits. Thus in order to 'break even' those financial institutions must lower the interest rates paid to depositors by at least 0.4%. In essence this is another 'stealth tax' being imposed on fiscally responsible Americans / financial institutions, in order to pay for the bailout of those less responsible.

    ~
    Last edited by Melonie; 03-10-2010 at 07:43 AM.

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    Banned Melonie's Avatar
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    Default Re: Ally Savings Account

    and in reference to Capital One ... the 'king' of subprime credit cards ...

    (snip)"What credit-card payoff? Consumers are dumping debt
    Steep drops in credit-card balances driven by companies charging off bad debt

    CHICAGO (MarketWatch) -- Credit-card debt has been falling for 16 straight months but consumers aren't paying off their financial obligations as much you might think. Instead, they're walking away from the debt, forcing credit-card issuers to write off as much as 90% of that reported drop, according to a new report by CardHub.com.

    U.S. banks charged off a record $83.3 billion in credit-card losses last year. That makes up the bulk of the $93.2 billion drop in outstanding credit-card debt that was reported by the Federal Reserve for 2009.

    "The reduction in credit-card debt is not because consumers have found a bag of cash under their mattresses and are now paying down their debt," said Odysseas Papadimitriou, chief executive of CardHub.com.

    Papadimitriou drilled down into the Federal Reserve data detailing the declining consumer-debt levels. While the numbers painted a picture of frugality and fiscal conservatism, Papadimitriou was baffled, considering the high numbers of cash-strapped consumers and the now 9.7% jobless rate.

    "When consumers are paying off more than they usually do, that's a time of financial health," he said.

    What Papadimitriou found was this: Last year, outstanding credit-card debt dropped an eye-popping $93.2 billion to about $876 billion, according to Federal Reserve data, which are not seasonally adjusted. During the same period, charge-offs -- the unsecured debt the banks determine they won't get back and charge off to loss reserves -- added up to $83.3 billion.

    In other words, only about $10 billion of the drop is attributable to consumers paying off their debt.

    Robert Hammer, chief executive of investment bank R.K. Hammer, said when credit charge-offs are exceeding receivables, the impact is clear.

    "For the first time in my 30 years in this business, the dollar amount of card loans finished the year lower than they started," he said. "That would mean that consumers have either put their credit cards in a safe-deposit box and only get them out for special occasions or that some are cutting them up and not using them at all. And we don't think any of that is going on."

    Consider some of January's results, the most recent available. Capital One's charge-off rate climbed to 10.41%, above December's 10.14%. In 2005, Capital One's charge-offs shot up similarly with a rash of bankruptcy filings ahead of tighter federal laws. "(snip)

    from

  5. #5
    sugary
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    Default Re: Ally Savings Account

    Quote Originally Posted by hockeybobby View Post
    Are you debt free?
    I don't have any debts besides student loans (approx. $2500 left). Why?

  6. #6
    sugary
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    Default Re: Ally Savings Account

    i dont really understand these comments! Damn.

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    Default Re: Ally Savings Account

    I don't want to put words into HockeyBobby's mouth, but it's safe to assume that his reference to being debt free was meant to point out that 'negative' interest rates ( i.e. interest rates PAID out ... towards credit cards or consumer loans or other forms of debt ) are far more significant than 'positive' interest rates ( i.e. interest rates RECEIVED ... from bank accounts or CD's or investments ).

    Applied to your particular situation, choosing to invest say $1000 in a fully taxable 1.3% CD might yield a 'positive' 1.0% net return after taxes on the interest earnings. On the other hand, choosing to invest the same $1000 towards repayment of a 5% student loan would yield a 'positive' 5% net savings ( since an avoided expense isn't considered to be additional income subject to additional tax).

    However, with today's situation re the difficulty of young Americans to obtain additional credit ( and particularly so for young female Americans who happen to work in an 'adult' industry where income comes in the form of undocumented cash ! ), IMHO there is very good reason for a young person to want to maintain a certain amount of short term 'cash' assets as cover should an unexpected expense suddenly arise. Zero penalty for early withdrawl CD's, such as those issued by Ally Bank, certain credit unions etc. are 'as good as it gets' in regard to immediately available 'cash' savings to cover such an unexpected expense ( while earning a bit of 'positive' interest om the meantime ). In that situation, carrying $2500 in comparatively low interest rate student loan balance and $2500 in immediately available 'cash' savings is preferable to paying off the $2500 student loan but also having zero immediately available 'cash' savings to cover the cost of an unexpected expense.

    As to the merits of switching from a 1.3% fully taxable CD to a 1.45% fully taxable CD offered by a different financial institution, in reality you're probably looking at a net after tax difference of 0.1% ... or roughly $1 on every $1000 in CD principal. Is this enough difference to be worth the hassle of setting up a new bank account ? If you're talking $25,000 in CD principle, maybe. If you're talking $2500 in CD principle, probably not.

    ~
    Last edited by Melonie; 03-13-2010 at 11:35 PM.

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