Over the last month we have seen a few internet banks raise their savings account rates. SmartyPig is the latest to hike its rate. This was published today on SmartyPig's blog:
We are excited to announce that our SmartyPig banking partner, BBVA Compass, is raising the SmartyPig.com interest rate to 1% APY for ALL customers effective June 19, 2012. Account balances both above and below $50,000 will all earn the new rate.
Thanks to the DA member WorkingDaddy who posted on this news in this forum thread.
This increased the SmartyPig yield from 0.70% to 1.00%. I'm surprised to see such a big increase especially after that December rate cut in which the yield plummeted from 1.10% to 0.70% APY.
Reason for the Rate Hike?
As I mentioned above, we have seen a few internet banks raise their savings account rates in the last few months. The competitive rates from the new internet banks may be the reason for SmartyPig's rate hike.
One thing that should be noted is that it's BBVA Compass who agreed to raise the interest rate. SmartyPig just manages the account. The deposits are controlled by BBVA Compass. In the last few months, BBVA Compass has been offering some competitive CD rates. Why are they trying to attract more deposits? Some may wonder if it may be related to the problems of its parent, BBVA, the multinational banking giant that's based in Spain. This San Antonio Business Journal looked into this potential issue, but it mostly just repeated what it was told by Compass's management:
While Bray says he can’t comment on how BBVA’s depositors and borrowers are being affected in Spain, he says BBVA continues to do well in Spain and is well-provisioned and well-capitalized.
Looking just at the U.S. bank, it appears to be financially healthy. BBVA Compass has an overall health score at DepositAccounts.com of 5 stars (out of 5) with a Texas ratio of 13.45% (above average) based on March 2012 data. Please refer to our financial overview of BBVA Compass for more details. The bank has been a FDIC member since 1964 (FDIC Certificate # 19048).
Will Other Banks Be Offering SmartyPig-Like Accounts?
Another interesting thing that I noticed in this SmartyPig announcement is that the SmartyPig company changed its name in February to Social Money Systems. I noticed this new name in the SmartyPig press release. It appears they're trying to attract other banks to start savings programs similar to SmartyPig. The February press release described their plans:
“We are offering the SmartyPig technology to any bank, in any country, using any currency, at a fraction of the cost and time it would take them to do it themselves,” said company President Scott McCormack. “Up to 70% of your typical bank’s customer base is not generating any revenue. We are changing that by completely replacing the standard savings account with one that includes social networking features, a state-of-the art user interface, and additional streams of revenue.”
So we may see savings products similar to SmartyPig at other banks. They are calling this product GoalSaver. It will be interesting to see new banks offer this. The competition should be good news to savers.
For more information on SmartyPig, please refer to my SmartyPig savings account review.