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Ally Bank vs Schwab: Which Bank Is The Perfect Choice For You?

Ally Bank vs Schwab: Which Bank Is The Perfect Choice For You?

Banking is a polarizing subject for most. People tend to have strong opinions about their finances, and they stand by their decisions. However, many banks have become privy to the competition that’s happening between them. As such, the more prominent players have started to offer more appealing products to their customers, hoping to attract a new crowd.

Two of these banks are Ally Bank vs Schwab Bank. These banks have begun to offer products with exceptional benefits to their customers and new customers. If you’re looking for a new banking option, you may be interested in opening a new bank account with one of these institutes, they have the best  performance monitoring. Keep reading to learn about which best bank best suits your financial needs. Learn how to reduce business costs. Look at the top recruitment software to try.

Main Differences Between Ally Bank vs Schwab

The main differences between Ally Bank vs Schwab are:

  • Ally offers far more competitive interest rates for their accounts, whereas Schwab has low account interest rates in comparison to the competition
  • Schwab must be linked to a brokerage account, and they offer investment products and advice alongside accounts , whereas Ally allows you to link external accounts, but the features aren’t impressive
  • Ally offers a large range of different products and accounts even paystub generator for better HR operations, whereas Schwab is somewhat limited, and a savings account cannot be opened online through the bank

Right off the bat, you can see that Schwab’s products still revolve around the function of investing. While this may be right for some, it’s not for everyone. Ally is a bit more flexible in terms of the accounts offered, but it still feels limited in some areas. Those limitations may be made up for when it comes to the competitive interest rates they offer.

A Quick Overview of Both Options

Ally Financial

Ally Financial, also known as Ally Bank, started over a century ago, in 1919. However, they were started under a different name. The company was originally called the General Motors Acceptance Corporation, or GMAC for short. The financial institute’s original goal was to assist customers with automotive financing.

By the 1980s, the company had expanded its products offered to customers. In addition to automotive financing, they also offered motor vehicle insurance, as well as mortgage loans. However, in 1991 the company suffered major losses due to fraud issues. The company continued to function and quickly rebounded from the loss.

In 2000, a direct bank, GMAC Bank, was formed. Then, in 2006, a holding stake of the company was sold to Cerberus Capital Management, a private equity firm. This is when major changes began to take place. By 2009, the company had rebranded to Ally Financial.

In its most recent years, Ally Financial has pursued endeavors in online banking and investing. The company offers a partner product to Ally Bank known as Ally Invest, which offers similar services to some of those that Charles Schwab Bank offers.

Charles Schwab Bank

When you compare Charles Schwab Bank to Ally Financial, the history is far more recent. The Charles Schwab Corporation was founded in 1971, originally offering traditional brokerage services and investment advice. By 1975, the company had opened several branches and began offering banking services.

Schwab is a company known for big moves when it comes to finances. In the 1980s, the company was purchased by Bank of America. Within the same decade, Charles Schwab, the founder, purchased the company back from Bank of America for nearly 5 times the original purchase price.

The company’s endeavors have mostly focused on the investing side of things, and its history proves that. Nearly all of the company’s acquisitions have had to do with investment services. The banking products that they’ve created are centered around investing, as well. They require that accounts be linked to a brokerage account, and offer investing advice with all of their products. Charles Schwab Bank is a piece of the larger Charles Schwab Corporation, so this makes sense.

Products Offered by Ally Bank

Ally Bank is a full-service online bank that provides several different products to potential customers. Because the banking experience is entirely online, the company has little overhead. These savings are translated into the competitive interest rates, low fees, and no minimum products that they can offer customers.

Ally Bank is a modern banking solution, allowing customers to do everything from their smartphone, tablet, or computer. While other online entries limit their products, Ally Bank provides a range of options to customers on an entirely digital basis.

Checking Account

Ally offers a checking account that’s sure to fit most customers’ needs. The Ally Interest Checking Account is a great representation of the savings that an online bank can offer to those who are interested in online banking. With the Ally Interest Checking Account, you get a checking account that has no monthly fees. There is also no minimum deposit to open an account, and there are no overdraft fees if an overdraft occurs.

Ally offers customers free standard checks alongside the Ally Interest Checking Account, as well as a free debit card. Another perk is included in the free bill pay service that comes with the account. All of these are benefits that you’d likely be paying for elsewhere.

Now, because Ally is entirely online, you may be concerned about ATMs. Ally utilizes the Allpoint ATM network. As long as customers use one of these ATMs, there is never a charge associated. If an ATM outside of the Allpoint network has to be used, then Ally extends up to $10 of reimbursement for ATM charges each billing cycle.

Deposits into an Ally account require the use of technology. Customers can deposit checks using their smartphone camera and the Ally app. They can also set up direct deposit, mail-in deposits using postage-paid envelopes, or use Zelle.

Interest rates for the Ally Interest Checking Account are as follows:

  • Accounts with daily balances of less than $15,000 receive 0.10% APY
  • Accounts with daily balances of more than $15,000 receive 0.25% APY

Many of Ally’s competitors offer much lower rates than this, though the daily balances are also less. However, the higher rate is much higher than any others offered.

Savings Account

Like their checking account product, Ally only offers one savings account. Unlike the checking account product, the savings account doesn’t have a specific name associated with it.

Ally prides itself on being able to offer competitive interest rates thanks to existing as an online-only bank. Their savings account represents this, as well. No matter the balance, savings account through Ally offers a 0.5% APY. This is nearly nine times the national average, and the interest for the account compounds daily.

There are no minimum balance requirements, and there aren’t any monthly fees associated with the savings account. However, it needs to be noted that customers are only offered six transactions per billing cycle. Each transaction associated with the account after the sixth will incur a $10 fee. The fees have been waived due to the pandemic, though that may change shortly.

Money Market Account

Ally also offers a money market account, as many of its competitors. This account has the same APY as the savings account, holding steady at 0.5%. This is offered at all balance levels. This is the least competitive product offered by Ally, with other banks offering money market accounts with higher interest rates. Like the other accounts available through Ally, there are no monthly fees and no minimum balance requirements. Transactions are unlimited in this account, as well.

Certificate of Deposits (CDs)

Ally Bank offers several CDs to customers that fit into nearly any savings plan possible. The institute’s CDs are considered traditional high-yield accounts, and they range anywhere from 3 months to 5 years. If you’re considering a CD through Ally. these are the terms, followed by the rates that you will receive:

Term Annual Percentage Yield (APY)
3 Months 0.15%
6 Months 0.25%
9 Months 0.30%
12 Months 0.55%
18 Months 0.60%
3 Years 0.65%
5 Years 0.80%

Ally offers a Raise Your Rate CD with either a two-year term or a four-year term. Each product allows you to raise your rate throughout the product’s life. The two-year product offers the raise once, while the four-year product offers it twice. Each product has an APY of 0.55%.

All CDs from Ally have early withdrawal penalties. The penalty is dependent upon the term of the CD in question. For accounts that have a period of 24 months or less, the penalty is 60 days of interest. For accounts that have terms ranging from 25 to 36 months, the penalty is increased to 90 days of interest. Accounts with terms from 37 to 48 months incur a penalty equal to 120 days of interest and account with terms of 49 months or more incur a penalty of 150 days of interest.

If the penalties are a bit high, the bank also offers a No Penalty CD. The term for this CD is 11 months, with a 0.50% APY. Once the CD has been funded, money can be withdrawn within 7 days at no penalty. High-yield and Raise Your Rate IRA CDs are available as well. The APYs for these accounts are the same as the regular CDs offered.

Products Offered by Charles Schwab Bank

As discussed previously, Charles Schwab Bank is a branch of the Charles Schwab Corporation. The main intent of the corporation focuses on investing. As such, the Charles Schwab Bank leg of the corporation does, too. As a brokerage firm, Charles Schwab offers more financial products than you may need. However, like an online bank, the products are severely limited. Take a look at what’s up for offer below.

Checking Account

Charles Schwab offers a single checking account product, the Schwab Bank High Yield Investor Checking account. The account offers a 0.03% APY, much less than what’s offered by their competitors.

The unique part about the checking account opened with Charles Schwab Bank is the brokerage account that comes with it. Schwab requires that the checking account be linked with a brokerage account, and they are happy to provide one. For customers who aren’t interested in investing, this brokerage account will serve no purpose. As such, Ally may be a better option.

The High Yield Investor Checking account comes with checks and a Visa Platinum Debit Card. This card carries no foreign transaction fees, which is great for travelers. Additionally, there are no ATM fees with this account. Charles Schwab Bank offers rebates on any ATM fees incurred.

The checking account has no minimum balance requirements and no monthly fees. Accounts can be opened online, through a mail-in application, or at a local Schwab branch.

Deposits for the Schwab checking account are made in several ways. They can be funded by the brokerage account, via mobile deposit, direct deposit, mail, or wire transfer.

Savings Account

The Charles Schwab Bank savings account comes with a 0.05% APY. This is far below the average for an online bank. It also doesn’t come with a brokerage account. For the most part, the account is identical to the checking account. It just lacks the brokerage account. It also comes with a debit card, but no checks, naturally. The debit card also offers the same rebate on ATM fees.

When it comes to online banks, the APY offered by Charles Schwab Bank is low. When compared to physical banks, it may be a better option, though.

The User Experience for Each Bank

Ally Bank

Ally Bank aims to make online banking as easy as possible. The company offers 24/7 customer service, something that is a must with online banking. It also provides apps for all major smartphone operating systems that are highly reviewed. Additionally, Alexa-enabled devices can manage your Ally Bank app through voice commands. Ally makes online banking an easy and enjoyable experience.

Charles Schwab Bank

Charles Schwab Bank offers an app on every platform that makes banking transactions easy. The app allows you to move money between accounts, make mobile deposits, and check your investing portfolios. It also provides custom notifications and bill pay options. While there are physical branches of Charles Schwab, these are strictly investment centers, and no banking assistance can be obtained there.

Breaking it Down

Pros of Ally Bank

  • Ally Bank offers competitive interest rates on most products
  • There are no monthly fees or minimum balance requirements
  • On the go access and a great user experience
  • 24/7 customer service through chat, phone, or email
  • A full-service banking experience

Cons of Ally Bank

  • There are no physical branches, making some functions difficult
  • Cash is unable to be deposited into an Ally Bank account

Pros of Charles Schwab Bank

  • Unlimited ATM fee rebates
  • No monthly fees or minimum deposit requirements
  • No foreign transaction fees
  • Connection to brokerage accounts
  • Mobile access to all accounts and functions

Cons of Charles Schwab Bank

  • A limited number of products
  • Low-interest rates
  • Checking accounts require a linked brokerage account

FAQs

Question: Is Ally Bank safe?

Answer: Ally Bank is a safe bank to use, as it is FDIC insured. All accounts are insured by the FDIC for up to $250,000 per person, per ownership category.

Question: Is Ally considered a high-yield savings account?

Answer: Ally pays high-interest rates on all accounts when comparing them to the competition. They also charge no monthly fees and have no balance requirements. Ally is an excellent option for a high-yield savings account.

Question: Is Charles Schwab Bank safe?

Answer: Like Ally Bank, Charles Schwab Bank is FDIC insured. This means you don’t have to worry about the funds you deposit in these accounts.

Question: Do I have to invest when I have a Charles Schwab Bank account?

Answer: Charles Schwab is mainly focused on investing. The company offers a savings account that isn’t linked to a brokerage account, but that’s about it. The checking account offered by the company is linked to a brokerage account, so investing is the focus of it.

The Bottom Line

When it comes to online banking products, there is a vast sea of them to wade through. The two reviewed here are as different from one another as may be possible. If highly interested in investing and brokerage services, then a Charles Schwab account may be the right direction to go.

However, when compared to Ally, the interest rates offered at Charles Schwab are abysmal. For most people, Ally is going to be the better option. They offer a checking account that has a variable APY based on the amount in the account. Ally’s savings account offers an APY that’s nine times the national average. They also offer money market and CD accounts. Between the two financial institutions, Ally is the clear winner.

If you’re looking for more comparisons like this, be sure to check out the other articles available on Wallet on Fire!

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