Ally Bank CD loyalty bonus

[Ready]

I had a five year CD at Ally Bank which matured this week. Since their new rates are not as competitive as other banks, I called them to instruct them not to renew my CD. The woman on the phone informed me that I'm entitled to a "loyalty bonus" if I agree to renew my CD. Their current rate on a 5 year CD is only 2%, and other banks are offering 2.31%, so no reason to renew there, but I asked the woman what the loyalty bonus would be if I stayed.

She responded, it would be .005%. As in, instead of 2%, I would get 2.005%. So if I had $100K invested at 2%, I would get $2,000 per year. At 2.005%, I would get $2,005 if I'm doing the math correctly?

I responded, is that a joke? I didn't know banks even worked with decimals so small! She didn't know how to respond to my rhetorical questions, so she just said "no" and politely finished up the call.

I don't know why this bugged me so much, but what is the point in referring to .005% as a loyalty bonus? I just found it downright insulting. Am I being out of line here?

 

[Walt34]

Not out of line, I would have laughed at it too.

 

[freedomatlast]

That is quite rediculous. BTW, may I ask where are you getting 2.31% on a 5 yr CD?

 

[Earl E Retyre]

That is quite rediculous. BTW, may I ask where are you getting 2.31% on a 5 yr CD?

If you go to bankrate.com you can search for best 5 yr CD rates. It is showing that:
- E-Loan and Everbank have 2.31%
- Synchrony Bank and Capital One 360 have 2.25%
I am not sure of any other 2.31% - anyone else know any others?

 

[Ready]

If you go to bankrate.com you can search for best 5 yr CD rates. It is showing that:
- E-Loan and Everbank have 2.31%
- Synchrony Bank and Capital One 360 have 2.25%
I am not sure of any other 2.31% - anyone else know any others?

Correct - that is where I look when I'm in the market for CDs. I've been going with Barclays, because their 5 year CD only has a 6 month early withdrawal penalty. So if interest rates ever go up, it's relatively painless to exit out and reinvest at the higher rates.

 

[samclem]

Some CDs at Ally are "raise your rate" products that allow present CD customers to call and get the new higher rate if Ally offers a higher rate on te same term int he future. So, I was pretty sure their CD rates would stay low some of their products (mostly 2 and 4 year CDs.)

The woman on the phone informed me that I'm entitled to a "loyalty bonus" if I agree to renew my CD. . . . She responded, it would be .005%. As in, instead of 2%, I would get 2.005%.

Dang, maybe ask her if you could instead have one of the toasters that banks used to give their customers.

 

[nwsteve]

I think the "bonus" premium is good on most if not all their CD products. Personally, the 2 year with raise your rate option is all the further duration I am interested in.


Nwsteve

 

[growing_older]

My bank had a tiered savings rate for a while. If I put enough in to get the next tier the rate went up from 0.01% to 0.02% annually. That's from one hundredth of a percent to 2 hundredths of a percent. The tellers must have had a sales contest so I got a pitch to put more money in there and I was so surprised at the ridiculous bonus that I laughed. Sorry, teller, just trying to do your job.

I went to a drugstore once that had candy bars, normally 3 for a dollar, on sale for only 33 cents each. They had lots of BIG signs for the BIG candy sale. I asked if there were other items on sale. Nope, just these. But they did say sales were up quite a bit.

 

[MBSC]

I was offered a 0.05% Ally Bank bonus, similar to this person and this person. That would have been an extra $50 per year on $100k. I ultimately went with a secondary market brokered CD with 4 years remaining on the term.

 

[jim584672]

The three month Treasury was sold at 99.996208, which means you earn 37.92 cents on $10,000 for three months, wow, don't spend it all in one place.

 

[Golden sunsets]

I'm going to throw this out there as a possibility seeing that Ally's offer on the face of it seems so ridiculous. The mathematical expression of two percent is .02, or in other words a $10,000 CD earning two percent annually earns $10,000 x.02 = $200.00. So increasing that percentage rate according Ally's offer would be the current .02 + .005 for a total of .025, which we can all agree equals two and a half percent and in actuality beats the competing 2.31%. Did anyone ask the bank that question? I mean I could be wrong but it would explain why the loyalty bonus would actually make sense and entice current customers to remain loyal. Could the customer service rep have misrepresented the offer?

 

[Golden sunsets]

I was offered a 0.05% Ally Bank bonus, similar to this person and this person. That would have been an extra $50 per year on $100k. I ultimately went with a secondary market brokered CD with 4 years remaining on the term.

.05 times $100,000 is actually $5,000. If you mean you were offered .005%, like the OP, then that equals $500.00, not $50.00.

 

[dallas27]

I'm going to throw this out there as a possibility seeing that Ally's offer on the face of it seems so ridiculous. The mathematical expression of two percent is .02, or in other words a $10,000 CD earning two percent annually earns $10,000 x.02 = $200.00. So increasing that percentage rate according Ally's offer would be the current .02 + .005 for a total of .025, which we can all agree equals two and a half percent and in actuality beats the competing 2.31%. Did anyone ask the bank that question? I mean I could be wrong but it would explain why the loyalty bonus would actually make sense and entice current customers to remain loyal. Could the customer service rep have misrepresented the offer?

I remember a old phone call online of a guy talking with a company trying to get them to understand the difference between .02 dollars and .02 cents. Multiple escalations and they just didn't get it.


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[gauss]

Remember most people (non-ER.org members) can't do "higher math" in their head. If they are told they are getting a bonus they may jump on it..

-gauss

 

[Golden sunsets]

Remember most people (non-ER.org members) can't do "higher math" in their head. If they are told they are getting a bonus they may jump on it.. -gauss

I understand but is .005 x $100,000, not $500.00 rather than $50.00?

 

[Golden sunsets]

Ready is right. (Sorry to imply otherwise ready). I checked the Ally webpage for its loyalty bonus program. Their bonus is .05 which when converted to its proper mathematical expression equals .005. There are articles on Ally's loyalty program and its changes. Pre 2014 their bonus used to be .25, or a quarter of a percent, a relatively meaningful bonus in this low interest world. In 2014 that bonus was changed to .15. In 2015 that bonus was lowered again to .05. As gauss suggested they may be hoping that old customers won't compute the actual dollars and assume that the old loyalty program is still competitive. Or not. Internet articles express the point that Ally's previous generous program has been gutted.

 

[hnzw_rui]

Ready is right. (Sorry to imply otherwise ready). I checked the Ally webpage for its loyalty bonus program. Their bonus is .05 which when converted to its proper mathematical expression equals .005.

Umm, 0.05% = 0.0005, not 0.005.

0.005 is 0.5%.

 

[ownyourfuture]

".005% as a loyalty bonus? I just found it downright insulting"

I would also

 

[gauss]

Thanks for following up Golden.

Agreed that 0.5% bonus would have been worth something more than the insult which is .005%

 

[Chuckanut]

Many big corporations seem to offer their best bonuses to new customers and not the loyal old customers. Recently, I have seen cable and satellite offers for new customers that are far better than the deals offered to existing customers. My credit card company will give tens of thousands of points to new customers while waving a year's fee, but nothing extra to me as a long time customer.

Does anybody at the top ever ask "What is the lesson we are teaching our customers?"

 

[hnzw_rui]

Many big corporations seem to offer their best bonuses to new customers and not the loyal old customers. Recently, I have seen cable and satellite offers for new customers that are far better than the deals offered to existing customers. My credit card company will give tens of thousands of points to new customers while waving a year's fee, but nothing extra to me as a long time customer.

Does anybody at the top ever ask "What is the lesson we are teaching our customers?"

Agreed. There's no incentive for customer loyalty. This is pretty much why I ended up just cancelling pay TV altogether.

 

[gauss]

Agreed. There's no incentive for customer loyalty. This is pretty much why I ended up just cancelling pay TV altogether.

+1

Pay TV? Isn't that what our parents used to watch back in the NTSC (analog) days?

 

[Dog]

New customer incentives vs loyalty rewards. I was in Telecom for most of my career. I brought the issue up multiple times to our executives. It comes down to customer acquisition (a number reported to Wall Street). They utilize "save teams and incentives" to retain customers that threaten to disconnect (line loss also reported).
They don't see a need (benefit) to reward a customer that stays/pays every month.


Sent from my iPhone using Early Retirement Forum

 

[JoeWras]

Many big corporations seem to offer their best bonuses to new customers and not the loyal old customers. Recently, I have seen cable and satellite offers for new customers that are far better than the deals offered to existing customers. My credit card company will give tens of thousands of points to new customers while waving a year's fee, but nothing extra to me as a long time customer.

Does anybody at the top ever ask "What is the lesson we are teaching our customers?"

Oh boy you hit a nerve. I was a fairly early adopter of Dish Network. Everyone had to buy their own box. After only 3 years, they changed things so much that my box (with apparently a small memory) could not properly handle the guide they were pushing down. So, remote button inputs would take about 30 seconds each.

I called in and they said the only solution was to upgrade. I asked that they help pay for the hardware they broke by the new channel model. No dice. I asked that they lower my monthly charge to the new customer price. No dice.

I told them that Charlie Ergen could kiss my <...> and dropped them right there on that call, and immediately sold my stock in Echostar that day. I was P.O.'d and have never looked back.

Meanwhile, now with Uverse, I have to call in each year and ask to cancel. This results in a transfer to retention whereby they cut 30% or so. What a game.

 

[Chuckanut]

We're really getting off topic here, but I would like to mention that I have heard that some companies have ways of profiling people who don't change providers often. Thus, these people often get higher rates than those on the list of people who are willing to change to other providers of a service.

Price Optimization: Being A Loyal Auto Insurance Customer Can Cost You : NPR

Energy firms 'charge loyal customers more'

http://minnesota.cbslocal.com/2010/12/09/good-question-why-do-new-customers-get-the-deals/

Some of the biggest companies are adding a surcharge to the tariffs of households who have not changed their supplier, This Is Money reports.
On average, they are paying £76 more for gas than new customers, although the difference is £89 more for people who choose to pay by direct debit.

But that doesn’t explain why a similar amount of money is spent on retaining old customers. Upton has an explanation for that.
“The secret in marketing is that most people are trapped by inertia,” he said. “You know there’s a better offer up the block, but it’s too much work to change.”