An Ally Spending Account Works Like a Checking Account but Isn't One
An Ally Spending Account is not a checking account in the traditional sense. It is a savings account that Ally Bank designed to function more like a checking account—with a debit card, online bill pay, and direct deposit. The key difference: it earns interest on your balance, whereas a standard checking account typically does not.
The account comes with a debit card and allows you to pay bills online, transfer money, and receive direct deposits. You can also make unlimited transfers and withdrawals without monthly fees. But because it is classified as a savings account under federal banking rules, it has some limits that checking accounts do not.
Key Takeaways
- An Ally Spending Account is a savings account, not a checking account, but it includes checking-like features such as a debit card and bill pay.
- The account earns interest on your balance, which a traditional checking account does not.
- Federal law limits certain types of transfers and withdrawals from savings accounts, though Ally's rules on this have changed over time.
- If you need a true checking account for business use or frequent check writing, an Ally Spending Account may not be the right fit.
- You can use the account as your primary banking tool for everyday spending, but you should understand the account type before opening it.
How the Spending Account Differs from a Checking Account
A checking account is designed for frequent transactions and typically does not earn interest. A savings account is designed to hold money and earn interest, though it traditionally had limits on how often you could withdraw. Ally's Spending Account sits in the middle: it is legally a savings account, so it earns interest, but Ally has removed most of the withdrawal restrictions that used to apply to savings accounts.
The practical difference for you: you get interest on your money while still being able to use a debit card and pay bills online. If you keep a balance of $0.01 or more, the account earns interest at Ally's current rate. A checking account would not pay you anything on that same balance.
What You Can and Cannot Do with a Spending Account
You can use the Ally Spending Account debit card for everyday purchases, set up direct deposit, pay bills online, transfer money to other banks, and withdraw cash at ATMs. You can also link it to other accounts and move money between them. Ally does not charge monthly maintenance fees or require a minimum balance.
What you cannot easily do: write paper checks. The account does not come with a checkbook. If you need to pay someone by check regularly—such as rent to a landlord or contractors—you would need to use a different account or request checks from Ally, which may take time. You also cannot overdraft the account; if you do not have the money, the transaction will be declined.
Interest Earnings and Account Features
The Ally Spending Account earns interest on your full balance. The rate changes based on market conditions and Ally's current offerings, so you should check Ally's website for the current rate before opening the account. Unlike a checking account, every dollar you keep in the account works for you by earning interest.
The account also includes online bill pay at no cost, the ability to set up automatic transfers, and access to Ally's mobile app. You get a debit card in the mail, and you can use it at any ATM that accepts Visa (Ally reimburses out-of-network ATM fees). There are no limits on how many times you can use the debit card or transfer money online.
When a Spending Account Works Well for You
An Ally Spending Account makes sense if you want a single account for everyday spending and saving, and you do not need to write checks. It works well if you receive direct deposit, pay most bills online, and want your money to earn interest while you use it. Many people use it as their primary account and keep a small amount of cash on hand for situations where they need to pay by check.
The account also works well if you want to avoid monthly fees and minimum balance requirements. Because Ally is an online bank with no physical branches, it passes those savings to customers. If you are comfortable banking online and via mobile app, the Spending Account can replace a traditional checking account entirely.
When You Might Need a Traditional Checking Account Instead
If you run a business, you will need a business checking account, not a personal Spending Account. If you write checks regularly—more than a few times a month—a traditional checking account with a checkbook may be more practical. Some landlords, contractors, and service providers still require payment by check, and ordering checks from Ally takes time.
You might also prefer a traditional checking account if you want overdraft protection, which allows a transaction to go through even if you do not have the funds (and you pay a fee). The Ally Spending Account does not offer overdraft; transactions simply decline. If you need that safety net, a checking account at a bank that offers overdraft protection would be a better choice.
How to Decide: Spending Account or Checking Account
Ask yourself three questions: Do I write checks regularly? Do I need overdraft protection? Do I want my everyday account to earn interest? If you answered no to the first two and yes to the third, an Ally Spending Account can replace a checking account. If you answered yes to any of the first two, you may want a traditional checking account, or you could keep both—a Spending Account for everyday spending and a checking account for checks and overdraft.
You can also open an Ally Spending Account and see how it works for you. There is no penalty for closing it if it does not fit your needs. Many people find that they rarely need to write checks and that the interest earnings make the Spending Account worth using as their primary account.
Frequently Asked Questions
Can I get a debit card with an Ally Spending Account?
Yes. The account comes with a Visa debit card that you can use at any merchant and any ATM. Ally reimburses fees charged by out-of-network ATMs, so you can withdraw cash without paying extra.
Does an Ally Spending Account have overdraft protection?
No. If you try to spend more than you have in the account, the transaction will be declined. You cannot overdraft the account, and there are no overdraft fees.
Can I set up direct deposit with an Ally Spending Account?
Yes. You can receive direct deposit of your paycheck or other income into the account. Ally provides the routing and account numbers you need to give your employer.
What happens if I need to write a check?
You can request checks from Ally, though they are not included with the account and take time to arrive. If you write checks frequently, a traditional checking account may be more practical.
Does the Spending Account earn interest on all my money?
Yes. Any balance you keep in the account earns interest at Ally's current rate. The interest rate varies based on market conditions, so check Ally's website for the current rate.