03 October 2012

Is Ally Bank weird? Or is a "consumer protection act" hurting me as a consumer?

Ally Bank Online Savings Account FAQ

What is the difference between an Online Savings Account and Money Market Account?

The main difference is in how you access your money. A money market account gives you more access because you can be issued a Visa Debit Card and checks for these accounts. An online savings account does not support the use of checks and does not come with a debit card.
This seems like an odd answer. I know a few things about personal finance, and it would never occur to me to list this as the first (and only!) distinction between a bank's savings and money market accounts.

This also seems like a very odd policy. Why wouldn't Ally want me to have a checkbook for my savings account?

Is this one of those eminently-foreseeable-but-"unintended" consequences of Dodd-Frank?

5 comments:

  1. I find it odd that you would think it normal to have a checkbook for a savings account. Perhaps this is a context difference. I'm 47. To me, the phrase "savings account" means interesting bearing account, with no checks. The assumption is that the savings account has a much more predictable balance, and so can be easily used to back loans.

    A checking account bears no interest, on the presumption that it'll be highly volatile. In fact, a standard thing for many people was to put only as much money as was needed for the bills into the checking account each month. There was also the assumption that each check cost something to write, like 25 cents.

    My view of MMAs is less clear, but I've always thought of them as interest bearing checking accounts with high minimum balances.


    Of course, with enough accounts, you can have a much higher predictable pool of money, so the distinctions start to blur.

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  2. I wouldn't assume I'd be able to write checks from a savings account, but I'd definitely expect it would be more likely than an MMA account.

    Maybe I'm weird, but I remember my parents using checks drawn on their savings account for large, rare purchases and to transfer money to their checking account.

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  3. Sure, counter checks, one has to be able to move the money somehow, and banks love paper trails. There was simply an expectation of balances rising more than falling, generating a reasonably reliable amount of money left in the account.

    I always thought of an MMA as two accounts in one: there was a minimum balance, to ensure predictability, and then check writing on the balance above that. Savings on the bottom, checking on top, with the interest being an incentive to have much more than the minimum.

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  4. I think the distinction is related to some regulations that have been around for a long time. If you make more than 6 withdrawals from a savings account in a single month, by law it must be converted into a checking account because the regs assume you're lying and this account isn't actually for "savings". MMAs aren't restricted like that, and checks make some sense. I suspect it's a relic from the S&L days.

    Though you're right that I would not see that as the entirety of the distinction between them, or even the primary one.

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  5. A couple of banks mentioned the six withdrawal limit, but that didn't seem to apply if you called them and had them write you a check. I'm also not sure why it would matter if it was "really" a checking account. Maybe this dates back to when checking accounts were prohibited from bearing interest? That's pretty much pre-historic to someone of my vintage. I should really learn more about the S&L era.

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