One year ago SmartyPig pleasantly surprised its customers with the news of a big rate hike. Its savings account rate increased from 0.70% to 1.00% APY. In addition, the $50,000 balance cap was removed. The 1.00% APY has held for the last year. I looked back at what other banks were offering one year ago. At that time there were six banks other than SmartyPig with 1%+ savings or money market accounts without balance caps. These included TIAA Direct, MyBankingDirect, UFB Direct, CIT Bank, Barclays and Acacia Federal. Out of these six, only MyBankingDirect still has a 1%+ yield (1.05% APY as of 6/20/13). Two out of these six have not only cut rates but have slashed rates. UFB Direct’s savings and money market accounts now have a rate of only 0.20% and Acacia Federal’s money market account has a top rate of only 0.35%. So it’s noteworthy that SmartyPig’s savings account continues to pay 1% APY without a balance cap.
One important thing to note about the SmartyPig interest rate is that it depends on BBVA Compass. SmartyPig is a technological platform. It has partnered with BBVA Compass to hold the deposits. According to SmartyPig’s Q&A, “Your SmartyPig account is a separate account held in your name at BBVA Compass, an FDIC insured bank”.
SmartyPig isn't a typical savings account. It's built around the savings goal concept in which you set up the amount of a goal that you want to reach at some point in the future. You then make an initial deposit and set up recurring deposits to meet that goal.
When you reach your goal or when you decide to end your goal, you can have the funds and the accrued interest transferred (via ACH) back to your external account. You can also have the funds placed in a retail gift card from a retailer partnering with SmartyPig. The nice thing about the gift card is you can receive a cash boost on your savings. Most of the boost percentages are 5% or less.
For those who just want to use SmartyPig like a regular savings account, you should be able set up goals and recurring deposits in a way that won't be too much of a hassle. One thing to note is that SmartyPig does not permit partial withdrawals back to a user’s funding source. They do offer the option of transferring money between goals in the same savings account. If you think you may need to make partial withdrawals, you should set up multiple goals.
Do you have a SmartyPig savings account? How convenient has it been for you?