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Important Note about SmartyPig's Soon-to-Be Rate Tier

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SmartyPig

As I reported last week, SmartyPig announced rate changes for its savings account starting May 19th. Rates will go up from 2% to 2.15% APY for balances under $50K. For those with balances over $50K, there is something very important to note about this change. If a SmartyPig account balance goes over $50,000, the entire amount will earn the lower 0.50% rate, not just the amount above $50,000.

Also, it's important to note how SmartyPig defines balance. Here is what they specified in the letter from last week:

For purposes of calculating balances for determination of the rate tier that applies, total balances of all goals within your SmartyPig profile will be aggregated.

This is good news for those with savings goals under $50K. However, those with savings goals above $50K will want to make sure the total of all goals is below $50K before May 19th. Fortunately, with SmartyPig it's easy to change or end goals (see SmartyPig's FAQs).

I'm afraid some SmartyPig account holders may be surprised by this since it's rare to be punished for having a balance over a certain tier. It's the opposite of the typical rate tiers from banks which reward you with a higher interest rate on your entire balance when your daily average balance reaches a certain level. ING Direct's Electric Orange is a good example of this. If your EO balance is $49,999, your entire balance will only earn 0.25%. However, once you reach $50K, you'll earn 1.20% on the entire balance.

When rates go down for higher tiers, banks typically use a blended APY to determine the interest they pay. This is how reward checking accounts work. For example, the bank pays you 3% on all balances up to $25K. Over $25K, the rate falls to 1%. If your balance is $30K, the interest you would receive in a year would be 3% of $25K plus 1% of $5K.

For more information on SmartyPig, please see my SmartyPig review in which I review issues like FDIC coverage and transfer speeds.


  Tags: SmartyPig, savings account

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Comments
8 Comments.
Comment #1 by Quovatis posted on
Quovatis
That's not how I read it.  It's just saying, they add up all the balances in your profile, not the savings goal.  If you had two $75k goals, but only had $20k in each, you'll still earn the highest rate.  From the excerpt you gave, I don't see how one can interpret it the way you did.

2
Comment #2 by spf (anonymous) posted on
spf
from smartypig's blog posting:

Our rate tier is based on your "saved balance" across all goals. The total deposits in your SmartyPig account. For example, if your saved balance across all goals is $50,000.01 or more, the entire $50,000.01 will earn .50% APY, effective May 19, 2010. If you have any additional questions, please email support@smartypig.com. Thank you.

Mike Ferrari, SmartyPig co-founder

4
Comment #3 by Anonymous posted on
Anonymous
I would like to open an smartpig account with $49,400 initial deposit. ($50,000 - $600 = $49,400)

Then set up a transfter with $10 per month for 5 year max, total transfer = $10 X 12 X 5 = $600

so, I will be earning 2.15% for my money and I have the option to close my goal (withdraw all my money) at any time, am I correct?

2
Comment #4 by Anonymous posted on
Anonymous
yo anonymous, i think you have to transfer a minimum $25 per month

0
Comment #5 by Anonymous posted on
Anonymous
8. What are the minimum and maximum deposit limits?

A minimum deposit of $25 is required to start and maintain a savings goal. There is a maximum deposit limit of $50,000 in a 24-hour period to any savings goal, including contributions made to other SmartyPig account holders' savings goals.

The minimum recurring monthly contribution is $10 and the maximum recurring monthly contribution is $50,000.

2
Comment #7 by Anonymous posted on
Anonymous
Do not forget about interest.  If you deposit 49,400, you will go over 50k well before 5 years as interest is posted to your account.  I would imagine SP counts posted interest in the amount saved calculation.  I would open one goal with 40k and 9 goals with 1k to get to 49k.  Then, once you hit  50k after interest posting, close a 1k goal and you will still have at worst 49k in there without losing multiple days of interest by closing the entire goal and reopening.  And it should be noted that you do not have to make monthly deposits.  You can fund a goal with the entire goal amount.

SPF - Thanks for the blog post comment.  Seems like something that will catch some people and make them very unhappy.

3
Comment #8 by nuovo.donna (anonymous) posted on
nuovo.donna
Anon asked: I will be earning 2.15% for my money and I have the option to close my goal (withdraw all my money) at any time, am I correct?


NO you are most definately NOT correct.

1. You are REQUIRED to fund the account every month.  You may NOT opt out.  You have flexibility to alter the amount of the contribution, but you may not pre-emt it.  It's going to happen and once it does...

2  your funds are locked in place.  All of them are locked in place.  In my case currently a monthly contribution of $29 was scheduled to occur on the 1st.  It didn't happen till the 3rd.  Now when I try to close a savings goal totaling over $28,000, I'm told I may NOT close it out and have access to any of my funds until that tiny transfer of $29 is completed on the 10th!!!

This is odd because according to their own faq, "ACH transactions take 3 business banking days to clear. SmartyPig defines funds as having cleared once SmartyPig has collected the funds and has full use of the funds."  Evidently "full use" doesn't extend to releasing said funds back to you.

3. The only way to transfer money out of that account to CLOSE the savings goal.

When you add all of this nonsense together it means that every cent you have in a SmartyPig account is going to be completely unretrievable by you for at least 1/3 of every month, and possibly more.  I wonder how many people who do business with them actually manage to synthesize all of these rules down to this simple fact?

When I finally get my money, I'm through with SmartyPig.  However they may not be through with me.  I've been saving these funds for 2 years for a surgery.  If I miss it now because I'm unable to fund it in time, they WILL be hearing from my attorney.  No company should be allowed to hold YOUR money hostage for such trivialities.  This isn't a CD.  It's a savings account.

Don’t count on help from their customer service either in a matter like this because it won’t be forthcoming.

1
Comment #9 by nuovo.donna (anonymous) posted on
nuovo.donna
NO you are most definitely NOT correct.

1. You are REQUIRED to fund the account every month.  You may NOT opt out.  You have flexibility to alter the amount of the contribution, but you may not pre-emt it.  It's going to happen and once it does...

2  your funds are locked in place.  All of them are locked in place.  In my case currently a monthly contribution of $29 was scheduled to occur on the 1st.  It didn't happen till the 3rd.  Now when I try to close a savings goal totaling over $28,000, I'm told I may NOT close it out and have access to any of my funds until that tiny transfer of $29 is completed on the 10th!!!

This is odd because according to their own faq, "ACH transactions take 3 business banking days to clear. SmartyPig defines funds as having cleared once SmartyPig has collected the funds and has full use of the funds."  Evidently "full use" doesn't extend to releasing said funds to you.

3. The only way to get transfer money out of that account to CLOSE the savings goal.

When you add all of this nonsense together it means that every cent you have in a SmartyPig account is going to be completely irretrievable by you for at least 1/3 of every month, and possibly more.  I wonder how many people who do business with them actually manage to synthesize all of these rules down to this simple fact?

When I finally get my money, I'm through with SmartyPig.  However they may not be through with me.  I've been saving these funds for 2 years for a surgery.  If I miss it now because I'm unable to fund it in time, they WILL be hearing from my attorney.  No company should be allowed to hold YOUR money hostage for such trivialities.  This isn't a CD.  It's a savings account.

Don’t count on help from their customer service either in a matter like this because it won’t be forthcoming.

1