Most recently, on the morning of March 2, 2018, CIT Bank increased the APY for their no-penalty 11-month CD product to 1.85% from 1.55%, further solidifying their rate leadership at that time. As of June 18th, 2018, Ally has yet to retake the lead from CIT.
CIT’s initial salvo was on November 8th, 2017, when it raised the APY on its no-penalty 11-month CD product from 1.45% to 1.55%. This challenged the previous supremacy of Ally Bank’s no-penalty 11-month CD product.
You should also be aware that on May 24th, 2018, CIT also raised the rate on their their Money Market Account from 1.75% to 1.85%. So there is no longer an interest rate tradeoff to choosing the more-convenient liquidity of CIT’s Money Market account.
All updates are reflected in the body of the review below:
- In early December 2017, Ally increased the rates on their no-penalty CD, leapfrogging CIT Bank for deposits of $25,000 and above with a 1.6% APY. At that time the rates on the lower tiers of their no-penalty CD were also increased to 1.15% and 1.35%.
- Then, in mid-December 2017, Ally increased the rate on just the top tier of their no-penalty CD from 1.6% to 1.75% for deposits of $25,000 or more, further distancing their lead for high deposits as compared to CIT’s 1.55% rate for all deposit amounts. This was a temporary promotional rate that ended on January 2, 2018. On January 3rd, 2018, the rate for the top tier of Ally’s no-penalty CD was reduced from 1.75% to 1.6%.
- In late January 2018, Ally again lowered the rates on the top two tiers of its no-penalty CD by 10 basis points, bringing the rate on the top $25K+ tier to just 1.5%, once again below CIT’s 1.55% APY on its competing product.
- On the morning of March 2, 2018, CIT increased the rate on their no-penalty 11-month CD to 1.85% from 1.55%.
- On Friday, June 15th, 2018, Ally raised the rates for all tiers of its 11-month, no-penalty CD, but they still fell short of CIT’s rates.
In many ways these two leading no-penalty certificates of deposit have the best features of all deposit account types rolled into one product in a way that’s relatively free of tradeoffs:
- Like a typical CD, they enable you to earn a relatively high interest rate that is guaranteed to not be reduced for the duration of the deposit term, which is 11 months in the case of these products. So there is no risk of a bait-and-switch teaser rate that gets lowered after you open the account, as sometimes occurs with savings and money market accounts.
- Unlike a typical CD, they have no early withdrawal penalty (e.g. 6 months worth of interest, even if you’re less than 6 months into the deposit period of the CD). So if you unexpectedly need to access your funds or just become aware of a better investment option you want to pursue, you can withdraw the entire amount of your deposit without incurring a penalty.
The no-penalty CDs covered in this post are not entirely free of constraints, however:
- No partial withdrawals are permitted: If you do choose to exercise the penalty-free early withdrawal option, you have to withdraw your entire deposit amount. It’s generally possible to open more than one CD of the same type at an institution, so you can probably mitigate this constraint to some extent by breaking your total deposit amount into separate tranches, each of which could be withdrawn without touching the other tranches.
- These are not add-on CDs: You are not allowed to add additional funds to a no-penalty CD during its deposit term. However, it should be possible to open additional no-penalty CDs so long as you meet the minimum deposit amount, which is detailed below.
CIT Bank No-Penalty 11-Month CD
CIT’s product is pretty simple. It has a superior 1.85% APY regardless of the deposit amount, a minimum deposit of $1,000, and you can withdraw your money in full after 7 days from the time of deposit. While the CIT no-penalty CD has no maximum deposit amount, we recommend limiting your aggregate CIT deposits to the federally insured maximum, currently $250,000.
If you happen to already have funds in a CIT no-penalty CD or savings account and you want to take advantage of a rate increase, you can easily role your funds into a new no-penalty CD (or multiple no-penalty CDs if you prefer). On March 2, 2018, I spoke to a CIT Bank customer service representative about this and he explained that the process should go basically like this:
- Call CIT Bank customer service and explain that you want to roll money in an existing CIT account into a new no-penalty CD account.
- The CIT representative will have you open a new no-penalty CD online, using the usual process. You can do this while you’re on the phone with the CSR.
- One special note: When you get to the step in the process where you’re asked for the source of funds for your new no-penalty CD, you will choose the option to “Mail in a check” and you can indicate on the form that it will be for the minimum initial deposit amount of $1,000. Of course, you won’t actually have to mail in a check as they’ll be funding your new no-penalty CD from pre-existing funds in the amount that you specify over the phone.
- Your new no-penalty CD(s) and deposited funds should be reflected in your online CIT account after 24-48 business hours.
Ally Bank No-Penalty 11-Month CD
Ally’s product is tiered, with the rate depending on the deposit amount. It earns:
- 1.85% APY for deposits of $25,000 or more
- 1.75% APY for deposits between $5,000 and $24,999.99
- 1.25% APY for deposits of less than $5,000
With Ally’s product you can withdraw your money in full after 6 days from the time of deposit.
Other No-Penalty CDs
No-Penalty CDs are fairly rare and the others I found were not at all compelling. For example, Swineford National Bank has a 9-month no-penalty CD with an APY of just 0.15%. The Columbia National Bank has a similar 9-month no-penalty CD with an APY of 0.05%, but with something called “Relationship Banking” the APY is 0.30% — still a hard pass, in my opinion. AgFed Credit Union previously had a 30-month no-penalty CD with a 1.85% APY, but, sadly, that ended in September 2017.