SmartyPig Reverses Course, Cutting Rate to 1.75% APY
In late April, SmartyPig, a social website that lets friends and family members contribute to one’s saving goals, generated quite some buzz in the PF blog community when it raised its savings account rate to 2.15% APY. The reason why the move received so much attention was that SmartyPig did that while other banks were cutting rates. Plus, 2.15% APY was, and probably still is, the highest yield among online savings accounts. In the current low-rate environment, savers looking for good return for their hard-earned money are getting yields that are mostly in the low 1.0% APY range. That makes SmartyPig a very attractive alternative to traditional savings accounts, even with the extra work of setting up savings goals, etc. Comparing to other banks, what SmartyPig offers seems a little too good to be true.
Well, if you are considering using SmartyPig as your main savings account, you may want to think again because starting today, September 7th, the yield of SmartyPig savings account will be cut to 1.75% APY for account balance less than $50,000, a whooping 0.4% reduction from the current level (if you are a customer, you should have already received the notice). SmartyPig didn’t give any specific reason for the rate cut, but it happened in June that SmartyPig partnered with BBVA Compass, the 15th largest commercial bank in the country, which serves as the depository institution of SmartyPig customers. As we know, big banks are not friends of small customers. Before the alliance with BBVA Compass, SmartyPig has offered 2.01% APY for a very long time when a small bank, West Bank, was handling the deposits. So even though no reason of the change was given, I have to speculate that the big bank was behind SmartyPig’s rate cut. What bothers me the most is that unlike BBVA Compass, which operates hundreds of branches in several states, SmartyPig is a pure online bank so it doesn’t all the overhead as the B&M banks do. That’s why it could offer a significantly higher rate than even other online banks could. The alliance didn’t change the status of SmartyPig and how it operates, so I don’t see any obvious reason for SmartyPig to cut the rate itself, but the big bank can make it do it.
Now that SmartyPig isn’t as attractive as it was before (but 1.75% APY is still a rate that’s much higher than other online banks), will you still consider using it as a way to save more money (see SmartyPig review for more details about how it works)? And if you are customer, will you leave because of the cut?
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