When SmartyPig was first launched a few years ago, everyone, including myself thought it was the greatest thing since sliced bread. Not sure why people use sliced bread in the cliche but so be it. Anyway, over the last 12 months, SmartyPig has made some extremely questionable decisions and after an interest rate drop of 80 points just a few months ago, SmartyPig is at it again.
Earlier this month, SmartyPig announced a rate drop of 25 points, bringing their interest rate down to 1.10% APY. If you’re a SmartyPig account holder and didn’t hear about this rate drop, you’re not alone as this time around, SmartyPig kept things nice and quiet. Their first 40 point drop in September was well publicized and written about extensively on the SmartyPig blog. The next 40 point drop was quiet like this one and reasons for this drop were said to have been economic related even though the SmartyPig business model has little to do with economics and more to do with gift card conversions. Losing 100 points on an interest rate in less than a year is nothing short of abysmal.
But all of that changed when SmartyPig moved from the small West Bank to the much larger BBVA Compass. No doubt, the FDIC levied pressure to reduce the high interest rates of SmartyPig and what you have left is a very poor online bank offering one of the higher interest rates available. No longer the highest, but still comparable when you look at the available high interest savings accounts around today.
So what does interest rate drop mean to you? Well if you have money in SmartyPig (less than $50,000 of course), you’ll want to consider moving your money elsewhere. 1.10% is no longer one of the highest APY’s around and with the SmartyPig interface, deposit options and funding requirements / monthly goals can now be considered a hassle that is not worth the interest. When SmartyPig was 80 points higher than everyone else, a few small hurdles were to be embraced but now that they’re level with the likes of American Express, Discover and Sallie Mae, those hurdles make SmartyPig less attractive.
If you don’t have money in SmartyPig right now, keep a close eye on what they do in the next few months as I expect more bad news about interest rates coming from they’re camp. They haven’t disappointed with new developments over the last 12 months but the genius that used to be SmartyPig is all but finished with now. SmartyPig is FDIC insured, so you’re money is always safe but with every interest rate drop, it’s not earning as much interest as it used to.