Ally Financial, often cited as America’s best online bank by Money, once again cuts interest rates on savings accounts which give its customers an edge over many traditional bankers.
Ally is part of a new wave of online-only banks that have gotten rid of many customer fees associated with physical branches and managing paper statements. Thanks to its user-friendly mobile app, 24/7 customer support and competitive interest rates, Ally was named the best online bank overall, according to Money’s ranking.
But on Thursday morning, Ally’s customers woke up to a message informing them that the interest rates on the bank’s savings accounts were about to drop.
“[Customer name] the annual percentage return (APY) on your online savings account will drop from 1.90% to 1.80% across all balance levels, ”the email from Ally reads. “Your new APY is effective 10/10/2019 and will appear online in your account details on 11/10/2019. “
This isn’t the first time that Ally has cut interest rates in 2019, and it’s certainly a pivot of the gradual increase customers have grown accustomed to in previous years.
The lack of overhead means that online banks have had the advantage of giving customers more for their savings accounts. In 2018, this led to a race among online banks to see who could offer customers the highest possible return. the ally savings interest reached 2.2%.
But lately, changing market conditions have caused some pullback on this front. After years of increase interest rates, the Federal Reserve has made it clear that it will not do it again in 2019. In June, Ally responded by cutting its rate on savings accounts from 2.2% to 2.1%, with others following suit ( for example Goldman Sachs, which lowered the interest rate on its own online bank, Marcus, to 2.15%, and later, to 1.9%).
How will Ally’s changes affect return on investment for customers? For example, if you had $ 10,000 in an Ally account when the rate was 2.2%, you would earn $ 220 in interest over the course of a year. But when the rate is 1.8%, your return is only $ 180.
With an APR of 1.8%, Ally still has the highest interest rate for savings accounts among online banks only, and it has a solid mobile app and good customer service. Still, there are other types of banks with higher APYs on savings accounts: according to The bank rate, financial institutions such as Marcus, State Farm Bank and Barclays all currently offer savings accounts with interest rates of 1.9% or more.