It was thanks to a mistake that I opened a Tax-Free Savings Account (TFSA) with Ally. I was under the mistaken impression that ING Direct levied a fee to transfer a TFSA account to another institution but when Ally customer agents assured me that they do not charge transfer fees, I withdrew the entire balance out of my ING Direct account late last year, opened a new account with Ally in the New Year and put back the amount withdrawn into the new TFSA account. Ally sounded intriguing because of CDIC guarantee, high interest rates, 24/7 customer service, promise of no fees and good word-of-mouth reports (here and here). I learned later that ING Direct also offers free TFSA transfers but I’m not going back: Ally’s interest rates are similar or better than ING Direct’s for most accounts.

Ally happens to offer one of the highest interest rates on a savings account: 2.0% on TFSA and regular savings accounts but, alas, no RRSP accounts. But it is with GICs that Ally really shines. Ally’s GIC rates are 0.75% better than ING Direct’s on 3, 4 and 5 year terms with better early redemption rates. For instance, ING Direct currently pays 3.25% on a 5-year GIC and Ally comes in at 4.0%.

My experience thus far has been very smooth. Ally opened an account promptly and the initial funding and linking to a chequing account took about 10 business days. Ally did refuse a deposit of more than $5,000 to a TFSA account but after I explained the TFSA rules patiently and assured them that any penalties are my responsibility, they accepted the initial cheque. Interest payments are made prompty at the end of the month. After my initial test drive with a TFSA account, I also opened a savings account with Ally and found transfers to be very fast — one or two business days.

It’s hard to open a magazine or newspaper these days before shortly running into blue, full-page ads from Ally promising great rates and “absolutely no monthly fees”. It’s nice that it’s not just empty words — Ally has delivered on that promise thus far.

PS: Ally is a product of ResMor Trust, a subsidiary of GMAC. It is not currently available for Quebec residents.

This article has 35 comments

  1. I use Canadian Direct Financial, which is operated by Canadian Western Bank. Their high interest accounts pay the same rate, and although their GICs are a little less than Ally, their TFSA pays 3.00% which is 1% higher than them.

  2. I almost opened an Ally account, but then I found out a bit more about them from an NPR podcast called Planet Money here:

    http://www.npr.org/blogs/money/2009/10/rivals_mad_at_ally_bank_govern.html

    They did a little report on Ally (even though Ally sponsored the very same podcast) and I wasn’t happy to find out Ally is really GM Financing just rebranded after being bailed out several times by the US TARP fund. Basically as I understand it Ally is in a position of taking as much risk as they can because they have/had huge debt obligations and feel like they have the implicit backing of the US government. They offer higher interest rates then any other lender, and the other lenders don’t like that because Ally is the type of bank that increases the FDIC insurance costs of every other lender (in the US) and probably CDIC in Canada.

    After speaking with a Ally rep about my concerns I found out Ally Canada is a wholly owned subsidiary of Ally US, and that in the event that GMAC/Ally was allowed to go bankrupt it would take Ally Canada down with them. Of course there is CDIC coverage here so it’s not like this is a huge risk, but I was told CDIC insurance ONLY applied to the principal amount deposited, so say you put $5000 into a 5 year GIC paying 4% then 4 years from now Ally finally goes bankrupt you get your $5000 back but not the $800-1000 in compound interest. It’s a risk worth considering.

  3. thanks to JORDAN…………great research ! Sometimes the grass is not always greener. I think I will stay away from Ally for these very good reasons. Let’s wait until the double dip is behind us to see what financial institutions are still standing after this shake out. I bet the big 5 will be here, but the rest will have issues. Due diligence pays off. Thanks again Jordan for the heads up.

  4. Pingback: Tweets that mention Ally: A Good Choice For Savings Accounts | Canadian Capitalist -- Topsy.com

  5. “Egg management fee” – LOVE that commercial – cracks me up every time!

  6. My advice, particularly for those with +$100,000 to deposit, is Achieva Financial (http://www.achieva.mb.ca) out in Manitoba. Achiea is the online division of Winnepeg based Cambrian Credit Union. Not only are their rates higher than ING etc. but your entire account balance is insured not just the first $100k. I have been dealing with them from Ontario for a number of years now and they are by far the best financial institution that I have ever dealt with.

  7. I ahve to ask, are there ever monthly fees on a Savings account? Transaction fees yes, but monthly fees?

    • Canadian Capitalist

      @Jerry: I have two guesses: (a) Ally is referring to some banks which charge a monthly fee for providing account statements or (b) Ally is doing a CYA because they might start charging *some fees* in the future.

      @Bobby: I have to admit that I haven’t looked closely at the Ally fine print and how it compares to other banks. It might be something that is worthy of research. I’d be very concerned if Ally (or any other bank) shares private information with foreign governments, especially when they are not provided with legal reasons to do so. Anyone else has comments on this?

  8. Also disturbing, to follow up on Jordan’s note, is that Ally stores & can share your personal information with American authorities via the US Patriot Act. See their “Privacy Policy” – paragraph before “A Note on Marketing”: http://www.ally.ca/en/privacy-legal/online-privacy.html

  9. Canadian Capitalist

    @Axis: It seems that Canadian Direct has some account fees, especially a transfer fee of $50. I did quickly consider Canadian Direct but after learning about the fees, decided not to look further.

    https://www.canadiandirectfinancial.com/Personal/BecomingACustomer/ServiceFees/

    @Jordan: I’m not very concerned with Ally’s financial stability. It is hard even for investors to figure out how stable a bank is; it might be overkill for depositors to worry about the chances of a bank becoming insolvent. That’s why a CDIC guarantee is important. CDIC does cover interest payments as long as the total of principal plus interest is within the coverage limits:

    http://www.cdic.ca/e/depositinsurance/faq.html#interest

    @Lorne: I suppose it is a sign of the times that depositors are worried whether their savings are safe. There have been many new online banks over the years but I can’t recall worries about whether the new banks are safe before. That’s not necessarily a bad thing; we always have to be careful about where we put our money.

    @Ron: One reason I did not consider credit unions is the lack of CDIC guarantee. Yes, the credit unions have unlimited coverage under CUDGC but I feel that CDIC insurance is stronger.

  10. Thanks for the mention CC. I have opened a TFSA with Ally last year, haven’t had the time to write a follow up post. I moved $5K + interest from President’s Choice without any issues. I find it funny/surprising that they weren’t fully understanding the TFSA rules with regards to your deposit. I also got a $50 credit from Ally “to cover the other bank’s TFSA transfer fees” even though I used December 31st maneuver and didn’t pay a cent. All and all I’m quite happy with Ally so far, aside from the issues I have mentioned in my original post.

  11. When selecting good choices for a savings account or GIC’s, I think it’s important to consider risk and the sustainability of the bank/trust company. Afterall, we are talking here about our “safe” money which is supposed to be low/no risk. So, many thanks to JORDAN for diving deeper and giving the full story about Ally for depositors to consider. Ally has higher rates for certain deposits but let it be known that these rates are currently possible due to US Treasury bail-outs and not due to Ally’s sounder business practices when compared to their competitors. On the other hand, banks like to rip us off in fees so why not benefit from higher rates made possible by government hand-outs (for as long as they or Ally continue to exist)?

    Just make sure that you keep your balances (principal and interest combined) for each separate account under $100,000 (savings account, joint account, GIC deposits, etc.). If you purchased a $100,000, 5year GIC at 4% (daily compounded interest) by the end of the 5th year your deposit would have grown to $122,139. Say in the 5th year, just before your GIC comes due, Ally goes belly up, then your $22,139 in interest earned would not be covered by CDIC. You’d have to limit your GIC deposit to a maximum of $82,000 in order to have both your initial deposit and interest earned fully insured at the end of 5 years.
    Or – get them to pay out the interest every year … but then you have reinvestment risk…

    Personally, I’m signing up with People’s Choice … (thanks waldo!)

    Here’s a link I found comparing the High Interest Savings Accounts:
    http://www.highinterestsavings.ca/chart

    **********************
    Other Ally links if you’re interested:
    See recent article for summary of concerns:
    “Ally (GMAC) Bank’s Bailout Deceptions” Friday, 07 May 2010
    http://moneynews.com/BerlauMN/ally-bank-gmac-general/2010/05/07/id/358183

    And: “TARP Panel Finds Fault With GMAC Bailouts” Published: March 10, 2010
    http://www.nytimes.com/2010/03/11/business/11tarp.html

  12. Ally doesn’t have RRSPs, only TFSAs. I opened a TFSA with Ally. Ally’s interest rates are actually closely following what is available at some other institutions that I can see in my brokerage account – eg. GICs from Manulife, Equitable Group, ICICI, etc.

  13. I was thinking of Ally but now I know of the GMAC connection. They might not go bankrupt and even if they do one is covered but nothing will stop them reducing the interest rates to the industry average and even lower and charge some ridiculuos transfer fee. I mean everyone could do this but with Ally the risk is higher (imho).

  14. I have some familiarity with the discussion point regarding the United States Patriot Act clause. I had inquired with Resmor Trust (i.e. Ally)’s Privacy Officer Michèle McCarthy in November 2009 regarding an explanation about this statement. Her response indicated two main points:

    (1) “Some … client information is stored in the United States [and] in those cases … the U.S. Patriot Act applies to that client information.”
    (2) ” … it is possible for the U.S. Government to exercise its rights under that statute to look at information within the borders of the United States.”

    Other “foreign” banks potentially store information in the US as well, for example, ICICI Bank: http://icicibank.ca/legal/USAPatriotAct.htm.

    I believe this type of clause is a consideration for those who would be concerned with the storage of their information abroad.

    Should anyone be interested in the verbatim text of Ms. McCarthy’s letter, please e-mail me at info@moneylifeskills.com.

    Regards,
    Neil Jain
    President, Money Life Skills

  15. PPS note the tiny print PS after the big free Ally ad above. Looks like the Ally Bank rebranding of GMAC is working nicely.

  16. Declan Murphy

    Canadian residents are protected under PIPEDA, and it overrides the USA Patriot Act
    Just to set the record straight

  17. Pingback: Peoples Trust: Reader Choice For Savings Accounts | Canadian Capitalist

  18. Pingback: Peoples Trust: Reader Choice For Savings Accounts | MoneySense

  19. On a bit of a tangent, but related to your response @Ron – I’d be interested to hear why exactly you feel that the CDIC coverage would be more reliable than the CUDGC counterpart. Is this simply opinion or do you have some solid reasoning behind this? Since Credit Unions are regulated provincially do you have this same opinion for all provinces’ deposit insurance or are you only thinking of Manitoba? Maybe this is a topic for a new blog post! I’d be interested to hear your take on the matter.

  20. Pingback: Canadian Personal Finance Blog » Blog Archive » Random Thoughts: Top Kill!

  21. @Laura: Thanks for asking, I would like to know as well. Hopefully we’ll get a new blog post to compare CDIC to CUDGC.

  22. Very interesting topic for me as I’m in the process of switching my funds from ING to Ally to take advantage of the higher HISA rate. I was wondering about peoples take on the ’12 month no penalty GIC”. As I read it it essentially allows you to lock in your money at 2% (same rate as HISA). I’m failing to see a drawback to doing so, as if interest rates in the HISA rise you can always sell the GIC with ‘no penalty’, and if interest rates in the HISA fall then you win because you are locked in at 2%. Anyhow, just seeing if any of you saavy folks can see something I’m missing.

    Cheers

  23. Pingback: Week in Review – May 22 – 28 » 1stmilliondollar.net - A financial journey to our first million dollar

  24. Ally is not covered by CDIC. ResMor is. Why is it that when Scotiabank took over several trust companies, the trust companies are still separately listed for coverage at CDIC?

  25. Pingback: » Moving cash to higher interest rates Canadian Business Blogs | Advice on Investment in Canada, Stock Market, Small Businesses Opportunities

  26. I opened a 5 year Ally GiC account at 4%, I sent my cheque for 60,000 and when they received it they held it and could not process it because they did a credit check and my birthdate didn’t match the Trans Union Credit check, I don’t know why they needed a credit check when I was handing them 60,000 dollars but I asked for the cheque to be returned , and they promptly did just that, since it is taking some time to get my birthdate correct on Trans union’s records.

    I hope the rate of 4% will still be there when I am ready to send a cheque again, I just want a GIC not an account, but the initial opening of the GIC account went smooth. One thing I did find odd was that I wanted to send them my birth cert. by fax and they said that the office did not have a fax machine!

  27. “It is GIC where Ally really shine” (according to author) ?? – She didn’t do her homework. For the last 8-10 months I’ve been checking rates nation-wide via engines like GIC Direct and browsed provincial credit unions (same deposit insurance as any bank). At any given moment there were places giving same or better rate than ally.ca on the product that you’re interested in (in my case, 2-4 years TFSA GIC).

  28. @almot09: Current GIC Direct rates on 2-4 years TFSA GIC:

    2.25%
    2.6%
    2.95%

    The rates at Ally for the same terms are:

    2.40%
    2.6%
    2.90%

    Plus Ally GICs are redeemable before maturity.

    Ally is insured by CDIC, a federal agency. Provincial credit unions are insured by CUDGC, a provincial agency. The deposit insurance is *not* the same.

  29. Good job with the info guys, esp. Jordan. Great for a newbie like me 🙂

  30. Regarding all the comments… Ally is a legal company, offers “free money” with regards to a high interest… I have been with some of the 5 big banks here in Canada and get ripped off with fees,… my suggestion.. take the “free” ride.. costs nothing to sign up, no fees, secure and government regulated…
    paper trails galore if something happens…

    I signed up with NO regrets.. 🙂 besides, PIPEDA covers us in canada

    Declan Murphy says:
    May 26, 2010 at 1:04 pm
    Canadian residents are protected under PIPEDA, and it overrides the USA Patriot Act
    Just to set the record straight

  31. It took several.commercials to actually find out the person/company putting on this commercial as I kept muting it because of the content of the ad. Who would ever teach their children to be so inconsiderate as this commercial shows the originator to be? If Ally wants to sell their product, please show some niceness to others. This. Ad would not wNt me to invest in Ally.

  32. I find your TV advertisements to be most objectionale and demeaning to children. Surely you can do better than this!

  33. Pingback: Why isn’t Ally more popular? | Canadian Capitalist

  34. Fran Clarke and robin bolton…
    You are willing to forgo a no-fee, high interest account with Ally because you don’t like their commercials?
    You two are geniuses!
    That is all.