Ally no-penalty 11 month CD now at 1.5%

[calmloki]

Just noticed something - the Ally CD interest can be paid at maturity, monthly, or quarterly via credit to an account, paid by check, or as a credit to the CD.

If paid monthly as a credit to the CD does the CD's interest accumulating value grow over the 11 months, so that at the end of 11 months you are earning interest on 10,137.50+ vs. $10,000?

If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

 

[Sunset]

Just noticed something - the Ally CD interest can be paid at maturity, monthly, or quarterly via credit to an account, paid by check, or as a credit to the CD.

If paid monthly as a credit to the CD does the CD's interest accumulating value grow over the 11 months, so that at the end of 11 months you are earning interest on 10,137.50+ vs. $10,000?

If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

Looks like you can do it 2 ways. So pick which is better.

from https://www.irs.gov/publications/p17/ch07.html#en_US_2016_publink1000171541

"
When To Report Interest Income

When to report your interest income depends on whether you use the cash method or an accrual method to report income.
Cash method. Most individual taxpayers use the cash method. If you use this method, you generally report your interest income in the year in which you actually or constructively receive it. However, there are special rules for reporting the discount on certain debt instruments. See U.S. Savings Bonds and Original Issue Discount (OID) , earlier.


Accrual method. If you use an accrual method, you report your interest income when you earn it, whether or not you have received it. Interest is earned over the term of the debt instrument."

 

[audreyh1]

Just noticed something - the Ally CD interest can be paid at maturity, monthly, or quarterly via credit to an account, paid by check, or as a credit to the CD.

If paid monthly as a credit to the CD does the CD's interest accumulating value grow over the 11 months, so that at the end of 11 months you are earning interest on 10,137.50+ vs. $10,000?

If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

The CD compounds daily, so as long as you don't withdraw interest you'll earn the same amount on the CD even if you don't get it credited until maturity.

In terms of taxable income, I assumed it wouldn't show up on a 1099 unless credited to my account during that year.

 

[kaneohe]

.................................

If you opt to wait to be paid the interest until CD maturity, say 6-1-2018, does that mean you have no interest income on it in 2017? Some tax ramifications there.

.............................."Unless you make changes, this setting will automatically default to the interest disbursement option associated with your CD term.
12 month or less – interest is credited to your CD at maturity
........................................................
You can change how often and where your interest is credited on your current term in online banking......................................................"

You remain a cash basis taxpayer in both cases. By telling Ally how often to credit interest to your account, you determine how much your interest for that year will be. It is not always clear ahead of time what the best selection is.
If you have possibly large dividend/cap gains distributions late in the year and are worried about exceeding some income threshold, you can leave the default of pay at maturity stand which means your income is lower this year but higher next year. Might have to do a late December election for Ally.

 

[CountingDown2014]

Ally no-penalty 11 month CD now at 1.6%

Just noticed this last night and converted all of my CDs that were at the old 1.5% rate which was relatively easy to do online...

 

[nwsteve]

Just noticed this last night and converted all of my CDs that were at the old 1.5% rate which was relatively easy to do online...

+1 . Did likewise yesterday. Wanted to do all at once with our 3 CD's so opted to talk to rep. He must have been a new hire as I could tell he was following a script very closely.
When we got to setting up the new CDs, he informed me that all new accounts required a credit check. I was pretty sure for existing clients that this was NOT true. Since all our credit is frozen (thank you Equifax ;-( ), I asked him to check with a supervisor or put one on the phone. Sure enough no credit check for existing clients.
Entire process including about 5 min to get the supervisor issue resolved, took about 30 min for the three accounts--each has to be done in sequence.

 

[retired1]

Yep, it's pretty good deal. I opened one. Great place to park temporary cash.

 

[kaneohe]

+1 . Did likewise yesterday. Wanted to do all at once with our 3 CD's so opted to talk to rep. He must have been a new hire as I could tell he was following a script very closely.
When we got to setting up the new CDs, he informed me that all new accounts required a credit check. I was pretty sure for existing clients that this was NOT true. Since all our credit is frozen (thank you Equifax ;-( ), I asked him to check with a supervisor or put one on the phone. Sure enough no credit check for existing clients.
Entire process including about 5 min to get the supervisor issue resolved, took about 30 min for the three accounts--each has to be done in sequence.

Appreciate your posting your experience here . Might be useful since I'm in the same frozen boat.

 

[EQMAN]

Just did mine. Took 30 minutes on the phone after waiting for about 10 minutes to get the trust group on the line. Thanks for the update.