Dedicated to Deposits: Deals, Data, and Discussion

Update on SmartyPig's High Yield Savings Account

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Update 8/14/09: SmartyPig announced that the rate is scheduled to fall to 2.01% APY effective 8/17/09.

SmartyPig's savings account now has a history of more than a year of competitive rates. It has been near the top of my weekly rate summary for several months. As of 5/28/09, the rate is 3.05% APY. It has been a while since my last post on SmartyPig, so I thought it would be useful for another post. It's not a typical type of internet savings account. It's designed to be used for saving for specific goals. It's also designed to be a social savings tool (I described this in my first SmartyPig post). Consequently, it may be a little cumbersome to use for those who just want a liquid account for holding their money. I haven't opened this account, but I've reviewed comments of those who have, and I've recently discussed this account with a SmartyPig representative. If you have experience with it, please leave a comment.

Will the Rate Hold?

SmartyPig's rate history is impressive. Here's how their rates have changed since my first SmartyPig post in April 3, 2008:
  • 08/17/09: 2.01% APY
  • 06/22/09: 2.75% APY
  • 04/01/09: 3.05% APY
  • 01/01/09: 3.25% APY
  • 05/01/08: 3.90% APY
  • 04/01/08: 4.30% APY
As you can see, they haven't changed rates often. However, most of their rate changes occur at the start of the month. We'll see how they hold up next week for the start of June. According to the rep the rates are determined by West Bank, the FDIC-institution that holds SmartyPig's deposits, and the rates are subject to change at any time.

One thing to note about West Bank is that they also offer a reward checking account (see post). They had been offering it nationwide. Last month they started restricting new accounts to Iowa, and they cut their top rate from 5% to 4% APY. For many months they had one of the best nationwide reward checking deals with not only a 5% APY but a $50K balance cap. So it appears they attracted a lot of deposits. So this may be a factor in their SmartyPig rate decisions. West Bank isn't so small that they can be easily overwhelmed with deposits. On the other hand, they're not a large bank. As of 3/31/09, FDIC data shows them to have $1.60 billion in assets and $1.19 billion in deposits.

Money Limits & Accessibility:

SmartyPig appears to have made several enhancments over the year to make it easier to move money in and out of your account. You still need to set up at least one goal, and there are restrictions on how you can access your money. Below is a summary of these details based on the SmartyPig FAQ, the SmartyPig Terms & Conditions and from what I was told by the SmartyPig representative:
  • Minimum initial deposit to start a goal is $25, Maximum is $50,000 (T&C)
  • Minimum requirement for a savings goal is $250, Maximum is $250,000 (T&C)
  • Goal must have automatic monthly deposits of at least $10 from an externally linked account (T&C)
  • You can add money to your savings goal at any time (FAQ #43)
  • Maximum deposit limit in a 24-hour period to any savings goal is $50,000 (FAQ #8)
  • Goal can be closed at any time (assuming no recent transactions)
  • Multiple goals can be opened (according to rep)
  • Each goal can be funded by a different externally linked checking or savings account (according to rep)
  • Partial withdrawals are not allowed. You may redeem your funds at anytime, but you have to close the entire goal (FAQ #44)
  • Once closed, you can initate an ACH transfer back to the externally linked account with no fee. There's no longer a check option (FAQ #30)
  • ACH transfers back to your external account take 5-7 business days (FAQ #30)
  • Other options when the goal is closed: 1) transfer funds into the SmartyPig MasterCard Debit Card, or 2) transfer funds to a gift card which can provide some discounts, aka boost (see past examples at MyMoneyBlog).
  • Not allowed to split funds from a goal between ACH, gift card or MasterCard (according to rep)
For those who just want to keep a pool of liquid money earning a high interest rate, the main issue is the requirement of ending a goal before you can ACH back out the money. For that case, you should set up multiple goals. If you need some of that money for spending or for some other good bank deal, just close one or more of the goals. If you plan to make use of the gift cards, you'll want to make sure you don't put too much into that goal.

Some other details I was told by the rep include:
  • No hard credit inquiry, just a soft pull for identification purposes
  • Joint accounts are not available. You can have co-owners who have limited account access. More details on co-owners are in the T&C.
  • No beneficiaries can be listed
The savings accounts are held at West Bank, a FDIC insured bank (Certificate # 15614). If you go to West Bank's website, you'll see a link to SmartyPig so you know without a doubt that SmartyPig is legit.

West Bank's ratings for safety and soundness are fair: 3.5 stars (good) at BauerFinancial and 3 stars (performing) at Bankrate.com. Both ratings are based on 12/31/08 financial data.

For other high yield savings accounts, please refer to my weekly rate summary.

  Tags: West Bank, SmartyPig, savings account

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Comments
22 Comments.
Comment #1 by Anonymous posted on
Anonymous
No joint accounts or beneficiaries eliminates my interest.

-1
Comment #2 by jjtricket (anonymous) posted on
jjtricket
To many annoying requirements!

-1
Comment #3 by Anonymous posted on
Anonymous
Not a very smart pig.

-1
Comment #4 by Anonymous posted on
Anonymous
Good heavens! It takes 5 - 7 Business Days to receive your money by ACH? That's a lot of lost interest (and probably slower than a snail mail check would have been).

2
Comment #5 by Anonymous posted on
Anonymous
When I looked over the FAQs, I was really unable to tell if FDIC covered an INDIVIDUAL's SmartyPig account. I understand Smarty Pig's funds are held by FDIC insured West Bank....but if 100 of us each had $10k in deposits with SmartyPig...are each of the 100 of us covered to $250k OR is our collective $1M only viewed by the FDIC as a single account at West bank??? Should West Bank fail, would we only be 25% covered?????

-1
Comment #6 by Joe (anonymous) posted on
Joe
I've been with Smartypig since October of last year. I love it. The interest rate is great. The website is very easy to learn.

I use it as a sort of liquid piggy bank. You can "stop" all your goals by reducing the goal amount to what you already have in the goal, or just a few dollars more than they have.

You can transfer money in, willy nilly, without having to use the automatic monthly transfers.

The only caveat, which the review mentions, is make sure to have lots of smaller goals, rather than one single large goal. Otherwise you can't pull out money without pulling it all out.

1
Comment #7 by Banking Guy (anonymous) posted on
Banking Guy
They have more FDIC information in their Security & FDIC page:

Your SmartyPig account is held at West Bank, an FDIC insured bank. FDIC insurance covers an individual account holder for up to the maximum amount allowed by law in accounts held at West Bank.It appears that accounts will be insured as if they were held directly at West Bank.

1
Comment #8 by Anonymous posted on
Anonymous
It should also be noted that even after you have reached your goal, you can continue contributing to that goal, but your monthly contributions will stop. IOW, always set up the lowest possible goal to avoid large monthly withdrawal and add whatever amt you want using non-recurring one-time ACH transactions. Unless monthly withdrawals are what you want.

1
Comment #9 by Anonymous posted on
Anonymous
Re: the FDIC statement. I had seen that and considered that statement so ambiguous as to be something Bernie Madoff could write. The first sentence does not necessarily relate to the second sentence. It could be a bad writer, or it could be a deception. It would have been simpler to write:
Your SmartyPig account is held at West Bank, an FDIC insured bank, and your individual account is insured for up to the maximum amounts allowed by the FDIC.

That would be clear. What is written is ambiguous.

1
Comment #10 by Doug (anonymous) posted on
Doug
I reread the FDIC wording several times, and found absolutely nothing ambiguous about it.

Smartypig -> West Bank, West Bank -> FDIC insured, therefore Smartypig -> FDIC insured.

There is probably a legal reason why they couldn't simply say "Smartypig accounts are FDIC insured".

1
Comment #11 by Anonymous posted on
Anonymous
At the risk of beating a dead horse to death, think of YOU as being SmartyPig. YOU tell your friends and family to give YOU money and that YOU will be depositing it all at West Bank, an FDIC insured bank. Just how much FDIC insurance do you think you will have on YOUR account? Answer...$250,000. What if your friends and family gave you a total of $1,000,000? How much insurance do you think THEY will have? Answer...$0. How much insurance will YOU have? Answer: $250,000...so $750,000 is uninsured in this scenario.

The bottom line is the question as to who owns the account at West Bank from the FDIC point of view.

Do the individual SmartyPig investors EACH own an insured account there...or do all investors collectively own one account...in the name of SmartyPig?

Given all the schemes that have been initiated out there to steal folks' money, having it clearly and specifically spelled out is what needs to be done before they would get a dollar from me.

1
Comment #12 by Anonymous posted on
Anonymous
I don't like rules, especially the 5-7 days to get your money back and the fact that once it's closed you have to retrieve all of the funds. The interest rate is what leaned me to open this account, and even with lost time you are still ahead if you keep it long term and open multiple accounts. Is it possible to retrieve these funds from your personal bank account in order to possibly shorted this time lag?

1
Comment #13 by Anonymous posted on
Anonymous
10. How is interest paid?

Interest is configured using a daily accrual method with quarterly postings to a customer’s account. (from FAQs)

This is awful! Interest posts quarterly!

1
Comment #14 by Anonymous posted on
Anonymous
Too many hoops in opening an account. They could verify my identity with some questions over the phone. Instead it may take weeks with snail mail. I would not recommend opening an account.

1
Comment #15 by Anonymous posted on
Anonymous
I'm a bit confused with this whole scheme.

1) What's implied when you meet (or don't meet) your goals?
2) Can I have the accrued interest pay back into the principle? (Just like a regular savings account.) I'm not interested in gift cards.

Some examples would really help to clarify their requirements.

1
Comment #16 by Anonymous posted on
Anonymous
Re: the above 2 questions:

1) "Once you have met your savings goal your automatic monthly contribution will stop. Your funds will continue to earn interest until you manually close your goal." (FAQ # 27) You can manually close your goal before the goal is met too (so long as there isn't a transaction in the works).

Their FAQ, btw, is informative, well-written and well worth reading. http://www.smartypig.com/about/faq

2) Accrued interest is posted to your account (principle) quarterly. Or you receive it when you close out your goal.

1
Comment #17 by Sarah N (anonymous) posted on
Sarah N
SmartyPig seems to have changed the time to get funds ACH'd to your account, per FAQ #29:
"Upon closing your goal, you may transfer your funds back to your existing checking or savings account at no additional fee. This process typically takes 2 business days for the funds to post to your bank account."

Makes it a little more attractive.

1
Comment #18 by JCE (anonymous) posted on
JCE
I'm still confused with the goal system. If I want to make an initial depostit of $10,000 for long term savings but want to have the ability to withdraw $2,000 at a time if needed in the future, I would need several smaller goals of $2,000 each. But my initial deposit would be larger than the smaller goals. Can someone explain how that would work?

1
Comment #19 by Anonymous posted on
Anonymous
Just so you know, SmartyPig just announce that for deposits over $50,000 they are now only going to pay .5%.  For deposits below $50,000 they are going to raise the rate slightly.

1
Comment #20 by Anonymous posted on
Anonymous
SmartyPig accounced that starting May 19, 2010 they are going to increase the rate to 2.15% of deposits of $50,000 or less.  But they are going to decrease the rate to .5% for deposits that are greater then $50,000.

As you can imagine this wasn't taken well by the people that have over $50,000 there, but as SmartyPig explained and it everyone should now be clear what SmartyPig is and isn't.  SmartyPig is NOT a bank.  It is a business that gets its money by getting commissions from retailers for selling cash cards.  So they are looking for customers that are saving up to buy something that can be purchased with one of their cash cards.  The customer gets extra interest and reduced cost on the cards.  People that never redeem a cash card are a cost to them, and especially if the amount/interest is high like for deposits over $50,000.

The money does go in a bank (West Bank), but that bank is not a parent/partner bank of SmartyPig.  SmartyPig is just a business account to them, and they don't pay SmartyPig anything.  So losing the above $50,000 might hurt West Bank some, but it will mean cutting costs to SmartyPig.

3
Comment #21 by Chris (anonymous) posted on
Chris
JCE,

I imagine you aren't looking any more for this answer, but just in case someone else has it, I will answer it.  You can open as many "goals" as you want, but to start a goal you have to fund it.  The smallest you fund is $25.  SmartyPig does not allow you to take part of the money in a goal, it is all or none.  But you can move money from one goal to another.  So you if you wanted to take out $2000 at a later time you could setup two goals one for $8000 and another for $2000, and then when needed stop the goal with $2000, and take it as a transfer back to your bank.  You could also setup a goal with $10,000, and then at a later time setup a goal funding it with $25, and then move money from the $10,000 goal to this new goal, and then stop it, and take the money as a transfer.

Needless to say all this takes quite a bit of time especially since SmartyPig has a delay after an goal is setup to when you can close it, and another delay after it is closed till you can get your money.  So you might want to plan ahead and have a goal already funded (if even just $25), so that you can move the money from another goal and stop it.

 

Bottom line SmartyPig is not a bank, it is a bussiness for cash cards redemption, and is best when that is your purpose.

3
Comment #22 by Sarah N (anonymous) posted on
Sarah N
I am using them as a "sweep" account and am pretty happy so far.  FYI, they seem to have just added a verification step (or maybe it's only for people with more than a couple linked accounts :).

Verification is the typical two micro deposits.  They then immediately withdraw the deposits (this is important if you're linking to a savings account, as this will be 2 of your allowed withdrawls).

Note that SmartyPig will pull the deposit OUT of the linked account before you have verified the account, but you cannot close a goal and send the money back to your account without verifying the account.

Hope this helps.

1