Dedicated to Deposits: Deals, Data, and Discussion

Update on SmartyPig's High-Yield Savings Account


When SmartyPig had the big rate cut last August, it fell out of the number one position as the top non-promo nationwide savings account rate. In the last few months many other banks have also cut rates, and now SmartyPig is number 2 for the top non-promo rate. SmartyPig's savings account now has about 20 months of history as a being a rate leader. It's different than many other savings accounts. This difference may be a hassle for those who just want a regular savings account, but it may also explain why they can pay higher interest rates. This NYT blog post has a good review of SmartPig's business model:
But the company is not in the business of attracting rate chasers like me, since it works with a partner bank and doesn't make money from lending out customer deposits. Instead, SmartyPig earns a small cut from its partner retailers if customers save toward a goal and then meet that goal by buying a television, say, or a vacation through those partners.

My guess is that they also make money when you use their debit card option. In a sense it's a little like reward checking accounts in which banks make money on more than just loans. For the case of reward checking, debit card usage helps pay for the higher interest. One thing to note about SmartyPig's interest rate is that, according to this FAQ, the APY is determined by SmartyPig's bank partner, West Bank, and it may be changed without notice.

Even though they're not after rate chasers, SmartyPig has made many improvements over the last 20 months to make it easier for savers. The latest changes were highlighted in November on the SmartyPig blog. The new feature #2 mentioned in the blog post shows how you can now split your savings up when you close your goal:
Before today, when you closed your goal, you could only redeem all of your funds to one redemption option. But our new redemption program offers more flexibility, allowing you to parse out your savings goal among all three options!

The three redemption options include buying retail gift cards (which offer a cash boost), transferring to the SmartyPig MasterCard debit card or transferring back to your linked checking or savings account.

SmartyPig Issues

In that SmartyPig blog post there are several comments about desired features. Similar comments have been left by readers here. I've included several of these below:

Withdrawing Funds

A few commenters at that SmartyPig blog post asked for an open-ended account option in which you can access funds without closing a goal. As one commenter mentioned, "Right now, to access partial funds in my 'Miscellaneous Savings' account, I have to close the entire goal, then transfer unused funds back later." As I mentioned in my May SmartyPig review, it's best to create multiple goals rather than one big goal. This gives you more flexibility.

POD/Joint Accounts

Another major request is the addition of joint and POD accounts. Here's the response from SmartyPig's co-founder:
The following is in response to POD/Joint Account questions. The sole owner of the SmartyPig account is the only person that has the authority/rights to the account itself. With that stated there is currently no option for a POD (Payable on Death) for a SmartyPig Account. If the account owner dies SmartyPig will refer back to the SmartyPig Account Owner's (Will) for direction of the funds in the account. However, this is something we are considering adding to SmartyPig in the future. A implementation date has not been determined at this time.

FDIC Coverage

In my May SmartyPig review, readers had some other concerns. One was the issue of FDIC insurance of the SmartyPig savings account. There was some wording at SmartyPig that was a little vague. Here is what is now stated at SmartyPig's FAQ:
SmartyPig accounts are held at West Bank and are insured by the FDIC to the full legal maximum.

You can verify the partnership between West Bank and SmartyPig at West Bank's website which has a link to SmartyPig on its home page. West Bank has been a FDIC member since 1934 (FDIC Certificate # 15614).

Quarterly Posting of Interest

Another issue mentioned in the comments was having interest posted quarterly. This shouldn't be a major issue since according to FAQ #26, "Your funds will continue to earn interest until you manually close your goal."

Transfer Speeds

Slow transfer speed is always an issue with online banking. It's important that the money show up in the destination account fast, that it's accessible quickly after the transfer and that there is no long period when the money isn't earning interest. Here's what is now stated in FAQ #29:
Upon closing your goal, you may transfer your funds back to your existing checking or savings account for free. This process typically takes 2 business days for the funds to post to your bank account.

FAQ #18 has info on when funds are transferred into your SmartyPig account:
ACH transactions take 2 business-banking days to clear. SmartyPig defines funds as having cleared once SmartyPig has collected the funds and West Bank has full use of the funds.

West Bank's Financial Condition

West Bank's rating for safety and soundness has gone down a bit at It's now 2 stars (below peer group) based on 6/30/09 data. It had been 3 stars when it was based on 12/31/08 data. It continues to be 3½ stars at BauerFinancial. This is also based on 6/30/09 data.

Other Competitive Savings Account Rates

Edit 12/05/09: Corrected 3-star rating date

  Tags: SmartyPig, savings account

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Comment #1 by Grady Stiles (anonymous) posted on
Grady Stiles
I know this isn't the appropriate place to post this, but I figured it would be seen here sooner: Bank of the Sierra just dropped the rate on their Free Sierra Reward Checking to 4.09%, down from 4.51%. Knew it was going to happen eventually...

Comment #2 by Thomas (anonymous) posted on
Small typo: It had been 3 stars when it was based on 12/31/08 data.

While I can sympathize with the inconvenience of having to close an entire goal (ie emergency fund), I would much rather have this system with a higher interest rate than easier access and a lower one. It makes it closer to CD rates, while still having access to the funds as needed. Plus, with the new option to transfer between goals - open up a new goal, transfer the amount you need it to that new goal - and close it. It's a small hurdle, but it prevents you from taking money away from your goals unless you are ready or really need it - good motivation SmartyPig!

Comment #3 by Anonymous posted on
SmartyPig is for kids, not a significant player in the banking system.

Comment #4 by Anonymous posted on
In their T&C, it says if account is dormant for 1 year, they will turn over the funds to the state treasury. Is that some kind of a joke?