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SmartyPig Raises Interest Rate, Adds Tiers

If you have a savings account at SmartyPig [3], you’ll be happy to learn that in a month they’ll be increasing the interest rate on those accounts. It’s a variable interest rate with two tiers that applies to your aggregate goal totals. If your balance is less than $50,000 then the rate will increase from 2.00% APY to 2.15% APY. If your balance is over $50,000, you will earn 0.50% APY. If you aren’t familiar with SmartyPig, here is my SmartyPig review [4].

Update: Originally I erroneously wrote that there were interest rate tiers, there are not. If your balance is under $50,000 you earn 2.15% APY on everything. If your balance is over, you earn 0.50% APY on everything.

In banking terms:

*Effective May 19, 2010:
· Interest rate earned on balances $1 – $50,000 will earn 2.133% (2.15% APY)
· Interest rate earned on balances above $50,000 will earn 0.499% (0.50% APY)

Ken at Bank Deals also covered this story [5] and has a few guesses at why SmartyPig increased the rate. My guess is that, based on their business model, they’re trying to get more deposits so more goals are met and converted into gift cards, where SmartyPig earns a commission. What’s the best way to get people to save more? Increase the interest rate.

In the press release, they also shared some savings statistics that were much higher than I expected. They’ve had more than $400 million in goals created and $150 million in goals reached in the United States, both numbers are much higher than I expected. They also claimed to have the best savings interest rate [6], which also appears to be accurate at the moment for savings accounts that are not reward checking accounts [7].

It’s great to see SmartyPig do well, you can’t knock a company that is trying to get people to save more money, but it’s a little sad to see that 2.15% APY on a savings account is big news these days.

(Photo: ginza-lina [8])