Since SmartyPig has the best interest rate for a nationwide savings account (2.15% APY for balances under $50K as of 8/10/10), many are wanting to use it for their general savings rather than for specific goals. With a general savings account, there are times that you may want to make a large withdrawal. For example, if you find a good CD deal, you'll need to be able to quickly withdraw the money to fund the CD. SmartyPig's goal features can add some complications to this. Here are three:
- "Each Savings Goal may have a recurring contribution. The minimum is $10.00" (Terms and Conditions) Note: I believe "must" would be more appropriate than "may". (see update below)
- "Goals cannot be edited or closed if you have a pending transaction" (FAQ #33)
- "SmartyPig does not offer partial withdrawals at this time. If you would like to redeem your funds, you may do so at anytime but will have to close the entire goal." (FAQ #51)
Update 7:55pm 8/10/10: As commenters have noted, monthly contributions are no longer required. Here's an excerpt from an email I received today from a SmartyPig rep:
Scheduled contributions are no longer a requirement with SmartyPig.
A goal does have to be created however you are able to select None as a funding frequency and can manually Add Money between $10-$50,000 per 24 hours as you wish.
A reader recently commented about the complication he experienced when trying to close a goal:
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 preemt 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?
Pseudo Partial Withdrawals
There are some ways to mitigate the above issues. One feature that helps is the ability to transfer between goals. Here's what FAQ #46 says about transferring between goals:
Funds may be transferred from one goal to another within the same savings account. Funds that are still pending cannot be transferred, and are not eligible for transfer until 4 business days after the funds have posted to a goal. Funds can be transferred in any amount, however, a minimum balance of $25 is required in each goal. There is a limit of five outgoing transfers per calendar month per goal. Accrued interest cannot be transferred and will remain in the goal where it was earned.
So based on this goal transfer feature, here's a recommendation that a reader mentioned as a way to do a partial withdrawal:
As an example. If you have a single goal, with say 50K in it and a target of 75K. You can create a new goal and transfer any amount you want into it. So if you only want to pull out 10K, just create a new goal with any target amount and transfer 10 into it. then close that goal.
It's important to note that you do not lose accrued interest when you close a goal. Both the principal and accrued interest will be withdrawn. Also, don't forget that once you go over $50K, your entire balance only earns 0.50%. So you don't want goals over $50K.
One caveat to keep in mind is this excerpt from SmartyPig's Terms and Conditions
SmartyPig reserves the right to close Savings Goals that exhibit a transaction pattern inconsistent with the purpose of SmartyPig goals.
A lot of SmartyPig profits come from gift cards that SmartyPig customers buy when they reach their savings goals. So it's possible SmartyPig may not like those with large balances who find ways around the goal features.