Ally doesn’t inspire confidence

I’ve written about Ally before and for the most part they have performed in a minimalistic manner, which is what they should be doing. They still have a fairly high short term savings rate (2.00%) and this is only overshadowed by a couple other obscure institutions offering 2.1%.

On their high interest savings page, I saw the following:

So is it 2% or 1.75%? I logged into my account and indeed, it was 2%.

Stuff like this makes me look at the CDIC page and read out the following passage to myself:

CDIC automatically insures many types of savings against the failure of a bank or financial institution that is a CDIC member. However, NOT all savings are insured and CDIC deposit insurance does not protect against fraud, theft or scam.

I’m really beginning to wonder if a bank failure was caused by fraud whether that would count. I don’t think it is the case for Ally, which is owned by ResMor Trust Company. In the USA, the Ally brand used to be backed by the General Motors Acceptance Corporation, while in Canada, ResMor Trust Company is a mortgage firm – very similar to ING Direct’s business model except that ING Direct uses the same name for both savings and loans.

Replacing ING Direct

The place where I normally park cash is in ING Direct, which has been a mainstay financial institution for myself for a very long time. When they first opened, they were by far and away the best place to park cash. Now they are a mediocre offering of the many online products that are available out there. I am guessing that they achieved their desired level of deposits and have achieved their desired debt-to-equity ratio with their residential mortgage offerings.

ING Direct hasn’t contaminated their customer experience by spamming their customer base with too many useless services, but this encroachment to simplicity has been eroding at a faster pace as of late – see my post about RSP loans, for example. It is simplicity that has caused me to stick around with ING Direct instead of shopping for other services. However, that time has now come.

So today I sent in a cheque to Ally, which used to be known as GMAC. Obviously since GM tarnished their brand with their bankruptcy filing and investing money in an institution that shares the same name with a bankrupt entity doesn’t inspire much confidence, they changed their name in 2009. In Canada, they are run by a firm called ResMor Trust Company, which otherwise does mortgages. In any event, they are CDIC insured and this means that the taxpayers of Canada will be picking up the guarantee for deposits up to $100,000.

Since I will not be depositing more than $100,000 in Ally, the safety issue of the institution is more or less mitigated.

Their peak offering is a savings account which delivers 2% interest (which is subject to change at anytime), but since this is significantly higher than ING Direct’s offering at 1.2%, it is a trivial process to click a few mouse buttons and transfer the money. Every dollar counts.

As interest rates rise, it will be interesting to see the spread between these two institutions since they are competing for the same bucket of capital from Joe Saver.