SmartyPig Quietly Cuts its Savings Account Rate
SmartyPig just reduced its savings account rate from 1.75% APY to 1.35% APY for balances up to $50K. With this rate cut, SmartyPig no longer has the top rate for a nationally available savings account. However, I only have four banks with non-promo yields above 1.35% in my weekly summary .
It's interesting to note that there was no mention of this rate cut at the SmartyPig blog. Also, there was apparently no email notice to customers. I asked a reader who has a SmartyPig account, and he said there was no notice whatsoever. For the last two rate cuts in September 2010 and in August 2009, SmartyPig management posted on the cuts before they took effect. This makes me wonder if BBVA Compass had forced the rate cut. In this September 2010 NYT article, a BBVA Compass VP explained the reason for the September rate cut:
with long-term rates so low, the spread between how much the bank earns on making loans and how much it pays depositors to finance those loans has been squeezed. Hence the rate reduction.
I would guess he would give the same reason for this cut. The highest rate that BBVA Compass lists for Texas is 1.75% APY for a 5-year CD.
I know banks don't have to notify their customers of rate changes on liquid accounts, but in my opinion, a notification of a significant rate cut is an honorable practice that I always appreciate.
Other SmartyPig Features Offset the Lower Rate?
As described in that September 2010 NYT article, SmartyPig wants customers to focus on the other features of the account that help with savings like goal setting and the cash back with retailer gift cards. Once you’ve reached a savings goal, you can receive cash back savings by placing it on a retailer gift card. Two current examples of cash back percentages include 3% at Amazon and 2% at Best Buy. Unfortunately, like the interest rate, some of the cash back percentages have gone down. Since September, cash back percentages at Best Buy and Staples have gone down from 3% to 2%. In September when I asked readers who are SmartyPig customers about this cash back feature, 11 of 16 readers who voted said they had no plans of using this feature.
Another downside with the retailer gift cards is that you might be charged a fee. According to the SmartyPig's Terms and Conditions:
Goals closed to a Retailer Gift Card may incur a processing fee of $2.25 based on the retailer.
SmartyPig's PR spokesperson noted in the comments of this blog post that retailers that offer ecodes don't have this fee:
If you choose to redeem with one of our retailer’s that offers ecodes, like Amazon.com, the cost is nothing, completely free. In terms of fees, our fulfillment costs are billed at cost, SmartyPig isn’t making any money there.
New SmartyPig Products
In that September NYT article, it was mentioned that we would see new products in the coming months. One was introduced in December. It's a prepaid card called the SmartyPig Cash Rewards Card. For those who use prepaid cards, this looks like a good deal. For those who use credit cards or debit cards, I don't see any benefits.
SmartyPig Overview
SmartyPig is now partnered with BBVA Compass. Your money at SmartyPig is held in a separate account in your name at BBVA Compass, an FDIC insured bank.
Please refer to my SmartyPig savings account review for more details about how SmartyPig works.
Anonymous - #1, Monday, January 3, 2011 - 8:57 PM
Not a surprise. I took all of my money out as soon as they announced the deposits would be moved to BVA Compass. It only took them 4 months to cut the rate from 2.00% to 1.35%.
Anonymous - #2, Tuesday, January 4, 2011 - 12:35 AM
SmartyPig dying?
Anonymous - #3, Tuesday, January 4, 2011 - 7:11 AM
They didn't waste time, did they?
Scott (anonymous) - #4, Tuesday, January 4, 2011 - 7:30 AM
This pig has been slaughtered
Anonymous - #5, Tuesday, January 4, 2011 - 9:23 AM
Well, that settles that; my money will be going elsewhere.
Anonymous - #6, Tuesday, January 4, 2011 - 9:24 AM
Excellent write-up, Ken. I was logged into SP on the morning of Jan 3rd, and there was no notice of the rate reduction at that time. So the rate change was one day RETROACTIVE!
I don't know who's to blame - SmartyPig or BBVA Compass. But a retroactive rate cut doesn't fall into my definitions of words like "upstanding" and "forthright". A number of other words come to mind, however.
Anonymous - #7, Tuesday, January 4, 2011 - 10:04 AM
There is a notice if you log in. But no e-mail or no post to the SmartyPig blog. The notice after log in was there if you logged in late in the afternoon Monday. It just said they were dropping the rate to 1.35%. There was no explanation (nor was their the need for one IMO).
KenR (anonymous) - #8, Tuesday, January 4, 2011 - 10:13 AM
I'm not sure why you do not list Discover Bank Premium Savings account which has a 1.35% rate and no maximum or minimum deposit amounts.
Glen (anonymous) - #9, Tuesday, January 4, 2011 - 10:28 AM
I just sent them secure e-mail to close my account and transfer the money to my local bank which pays 1.5% on savings.
Jo (anonymous) - #10, Tuesday, January 4, 2011 - 11:21 AM
My guess is many will be moving their money elsewhere. It's quite possible this will be a wake up call for SP. Hey, we can hope. I can't close my goal(s) while in the process of transferring the money, but it will give me time to decide if there's a better course of action.
There's always my RCA.....I epect a rate cut from them anytime now.....
Rosedala (anonymous) - #11, Tuesday, January 4, 2011 - 11:34 AM
This is so regrettable but expected in this kind of times. I'm sorry I just put in more money without knowing about the reduction. Moving to another institution won't help since any one of them can and will reduce interest at any time. What a shame that we are so to speak between the sword and the wall as to CDs vs. savings or money market...I guess grin and bear is our only option? :-)
Anonymous - #12, Thursday, January 6, 2011 - 12:34 AM
I just received an email from them about the rate change which reads as follows:
he interest rate paid on SmartyPig savings accounts with $50,000 or less in aggregate balances has decreased to 1.35% APY (balances of more than $50,000 will remain at .50% APY) as of Jan. 3, 2011.
Rate adjustment notifications are always listed in bright red as an alert notice when you log into your account. However, we received a number of requests from customers over the past couple of days stating that any future rate adjustments be communicated in advance via email.
We agree we could have done a better job communicating this, and we are now committed to advanced notice via email prior to any future rate adjustments. Thank you for your business.
Sincerely,
Mike Ferrari, SmartyPig co-founder
Raymond (anonymous) - #13, Thursday, January 6, 2011 - 1:04 PM
SmartyPig is no longer top dog and I'm going elsewhere where there are no restrictions. Have to laugh, just received this email from them. $25 to refer a friend are they serious. Looks like they know the people will be bailing.
To celebrate the New Year, SmartyPig is rewarding users with $25 for EACH friend they refer who successfully sets up a SmartyPig account and goal. We will compensate you for up to 100 friend referrals. That's a potential of $2,500 toward your existing SmartyPig goals!
Already sent an invitation for $10? No problem. If not yet redeemed, that referral will now earn you $25 when they successfully sign up and create a goal.
If you are ready to share with your friends and family the program that offers a competitive interest rate, up to 14% cash back from top retailers, and no excessive bank or credit card fees, follow these simple steps:
Anonymous - #14, Friday, December 2, 2011 - 6:04 PM
Smarty Pig sucks! Rates have been plummeting faster than Fast and Furious 25.
Now 0.70% for under $50k? when I started it was close to 3% like 2 years ago! I am moving my funds elsewhere.
Kill the Pig! Kill the Pig! (Lord of the Flies reference here)
Anonymous - #16, Friday, December 2, 2011 - 6:25 PM
Just received the same email as Raymond but didn't see anything about the change in referral bonus. Of course, I just redeemed a referral bonus two days ago for $10. Thanks for nothing, SmartyPig.
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