For two years, SmartyPig has been making so-called high-yield savings accounts look bad. The 2.01% APY currently offered is not a sky-high interest rate, but it beats just about every other major bank.
Two years after introducing SmartyPig with a $100 giveaway, and after SmartyPig made some important changes to their fee structure, I decided to open an account.
SmartyPig‘s focus is on savings goals. I see this as a natural extension of ING Direct‘s easy sub-accounts. In order to add money to your SmartyPig account once opened, you must create a savings goal, like a full emergency fund, a car, or your second semester at Harvard Business School. If you don’t have a specific goal, you can get past this step by choosing “miscellaneous,” though SmartyPig encourages you to find something to save for.
Like Discover Bank and Sallie Mae Bank, the account opening process was free of problems. Here are my impressions so far.
Opening a SmartyPig Savings Account
Update: SmartyPig has been selected as the winner of the First Annual Plutus Award for Best Savings or Money Market Account!
The first thing you might notice is that “SmartyPig” does not sound like a traditional bank name like, “First National Federal Bank of Metropolis.” SmartyPig is an arm of West Bank of Des Moines, Iowa. West Bank is a member of FDIC, so despite the non-traditional name, your accounts there will be federally insured up to the allowed limits.
You will need all the basics in order to open an account with SmartyPig, including an official ID, social security number, and a permanent address. After accepting the terms and conditions and the electronic delivery disclosure, you will be asked to enter your personal information. From the beginning, you will be asked to create five security questions, select a security phrase, and choose an image that will help assure you you are visiting the right website. These are all common security measures.
SmartyPig requires an email address, and once you provide one, you will not be able to continue with the account opening process until you retrieve a registration code sent to that address. When I went through this process, it took about two minutes to receive the registration code.
The next step allows SmartyPig to verify your identity. The bank will query your credit report to pull random information to ask you in the form of multiple choice questions. If you answer incorrectly twice, your application will be canceled and you will be required to wait 72 before starting over.
If everything goes well, however, you will soon be presented with your SmartyPig profile, where the bank will encourage you to set up your savings account.
Add your friends to your SmartyPig profile
Before adding my first savings goal, I wanted to link my account with two of my friends who have their own SmartyPig accounts. Yes, SmartyPig is a “social” bank. You have the option of sharing your goals with your friends or the public, and anyone can contribute to your savings goal. SmartyPig makes it easy for others to deposit money directly into your account. You can search for friends to add only by entering their email addresses.
I also took the time to add a profile picture to my account.
Creating your savings account and goals.
You can create any number of savings goals on SmartyPig, but first you must create and fund a savings account to hold those goals. The account must be funded through ACH, so have the bank account number and routing number for your linked checking or savings account available. Once the information is verified, you can set up your first savings goal.
For lack of anything better at the moment, I chose to save for a Canon EOS 5D Mark II, a new camera I’ve been eying. You will set a savings target, an initial deposit of at least $25, and a recurring deposit from a linked bank account. I chose to transfer an amount biweekly on the same day I receive my paycheck.
SmartyPig is the first bank that “gets” social networking. After setting up your goal, the bank will encourage you to share the news with your friends on Facebook, Twitter, or your own website.
Withdrawing your money from SmartyPig
If your savings goal is really a “spending goal,” like my example, then you may be interested in the withdrawal method most favored by the bank. SmartyPig has partnered with a number of retailers to offer discounted gift cards. If you reach your goal, SmartyPig will fund a gift card of your choice with a bonus of up to 12%.
The second option for withdrawing the cash you have accumulated is through a reusable SmartyPig-branded MasterCard debit card.
Although the bank discourages ending your goal and withdrawing your money prematurely, SmartyPig now allows you to make ACH withdrawals for free. At any time, you can withdraw all of the cash saved towards a goal at any point.
Since SmartyPig encourages customers to leave cash in their account until their goals are complete, SmartyPig customers withdraw funds less than customers of other banks. The average savings goal is four years away, so the bank can afford to offer interest rates that have more in common with long-term certificates of deposit.
As Consumerism Commentary reader Jaime G has pointed out, you cannot designate a SmartyPig account for joint ownership (only “co-ownership”), nor can you at this time designate a beneficiary.
Conclusion
In addition to savings goals, SmartyPig is a great option for a portion of your emergency fund. Now that you can withdraw your savings through ACH for free, there is no reason not to take advantage of SmartyPig’s higher interest rate for any savings you don’t need within two business days if you don’t mind withdrawing the entire goal. My initial ACH transfers into the account was slower than I would like, but if you plan on letting your cash earn compounding interest, the interest rate makes it worthwhile.
Interestingly, SmartyPig does not have a routing number nor do customers receive an account number. You cannot use an outside source to initiate ACH transfers, nor can you set up direct deposit of your paycheck.
Note: A SmartyPig public relations representative wrote in to clarify that you cannot withdraw partial goals — you must wait for the goal to be completed or withdraw all of the funds saved towards that goal. I’ve clarified the text above. Additionally, the representative wished to point out that ACH transfers take an industry-standard two business days.
What are your thoughts about SmartyPig?
Bank data
| SmartyPig (West Bank) | |
|---|---|
| Routing (ABA) number | N/A |
| Established | January 1, 1893 |
| FDIC certificate | 15614 |
| Savings interest rates | 2.01% APY as of March 17, 2010 |
| Location | 1601 22nd Street, West Des Moines, Iowa |
| Direct Connect | Not supported |
| Web Connect | Not supported |
| Mint/Yodlee | Supported |
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{ 11 comments… read them below or add one }
I *love* the idea of Smartypig, but will not open an account with them solely because they do not offer a true joint account owner option or beneficiary designation. So, if anything happens to me, my family only gets the money after court process. Not a big deal if you’re saving $500, but can be a big deal if your savings goal is a heftier sum. Just a thought. We’re using Discover Bank’s online savings and are pleased with it so far (formerly eTrade customers).
That’s an interesting issue, and I took that for granted. I understand that SmartyPig will soon offer a beneficiary option for these accounts but they might never offer full joint ownership (although full joint ownership *is* described in their disclosure). The “co-ownership” they do offer is not the same thing — a co-owner cannot close the account or end a goal.
That’s a very good review. One thing to note is that West Bank has announced in its last quarterly report that SmartyPig has grown too big for them, and they plan to transfer SmartyPig to a larger bank. Hopefully, they’ll find a bank that will keep the interest rate as competitive as it has been over the last two years.
That’s good to know. Thanks, Ken!
I use SmartyPig and I like it a lot. I didn’t know about the co-owner vs. joint ownership thing…good to know.
I used to like it when you couldn’t turn off the automatic deposits without ending the goal (thus forcing you to withdraw all of the savings in that goal at once). That made it easier for me to save, since I did not want to have to close a goal, only to have to reopen it later.
Now they’ve changed that and you can quit making contributions and start back up whenever you’re ready, and you can also take out just a portion of the money, which is beneficial if you’re having a bit of a crisis, but just makes it too easy to quit the forced, routine saving. I guess I’ll have to go back to having the savings debited out immediately so it doesn’t even end up in the paycheck…how weak I am!
can you make multiple goals, and, are there limits or restrictions to reach the goals? My goals: 1-airfare tickets $600, 2-camera for $500, 3-clothing for $300? And, for next 2 months put in $700, so that by the 3rd month, you redeem for the retailer gift-cards for 1) AA, get 3% SmartPig boost, 2) WorstBuy, get 2% SmartPig, and 3) Macys, get 12% SmartPig boost? Can i use my credit card to fund account to reach goal? Will credit card company treat it as purchase? Does SmartPig at West Bank code transaction as a service transaction purchase (and not as cash advance)?
I wish to invest the insured max of $250,000 in a six months CD with a decent return. Any
suggestions?
I also did not consider SmartyPig to be an option due to the lack of a beneficiary, but according to their new terms and conditions dated May 8, 2010, they now offer a POD or Payable on Death beneficiary.
Would love to receive a suggestion not involving a “D” or below “D” rated bank about investying
in a 6 months CD with a return above 1%.
When I came across the 2% yield, given this low interest rate environment, I became very interested in smartypig. Given that they now have a POD account (according to askmrlee), the beneficiary concern is less important. In response to Ralph, as long has they have FDIC insurance, your deposits are insured up to $250,000. So wherever you put your cash, make sure they have FDIC insurance. Then your money is insured no matter what.
Flexo, your review provided a nice overview and intro into the pros and cons of smartypig. I’m off to their site to proceed. Thanks.
(PS Welcome to Yakesie)
one thing to note is that there is a different rate for balances greater than $50,000. i was all set to open an account and transfer a large amount, and then i noticed the fine print at the bottom of the page:
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*Annual Percentage Yield (APY) is effective as of 7/22/2010. Balances $0.00 – $50,000.00 earn 2.133% (2.15% APY). Balances above $50,000.00 earn 0.499% (0.50% APY).
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i’d rather not have to open multiple accounts, so i’ll probably stick with one of the traditional banks.