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SmartyPig Review
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Not too long ago, when SmartyPig first debuted, I complained about how high SmartyPig’s fees were. I wasn’t the only one and shortly thereafter, they dropped many of those fees and restructured their program a bit. I think it’s a testament to their openness to feedback and willingness to adapt to their customer’s needs.
So what exactly is SmartyPig? It’s a website that helps you save towards your goals, giving you a high yield interest rate (currently 2.01% APY) and the ability to have family and friends help you save towards your goal. When you’ve achieved it, you can access it by having it transferred back to your bank, converted to a debit card, or converted to a retail gift card.
How SmartyPig Works
One of the big benefits of ING Direct was how easy it is to open new accounts for various savings goals. SmartyPig is setup with that same goal in mind, making it easy for you to setup savings goals. The difference is they add a social element, other people such as your friends and family members can contribute to your goals as well (if they fund a contribution with a credit card there is a 2.9% fee, I suspect this is to cover the credit card processing costs).
You can set a savings goal for anywhere from $250 to $250,000 and your minimum deposit has to be greater than $25 to start your goal. Then, each month, you must contribute at least $10 and your savings earn interest (currently 2.01%). Then, once you reach your savings goal, the monthly contributions stop and you can decide what you want to do from there. You can continue to contribute, convert it to a gift card from one of their partners, or have it transfered back into your bank account (for free, this was one of the fees they dropped!).
Gift Card Conversion
Besides the 2.01% interest rate and the ability to send money around, probably the biggest value-add of SmartyPig is in gift card conversions. You can convert your savings into a gift card or voucher to one of their partners with a percentage bonus.
For example, let’s say you decided to save money for a couch. When you’ve reached your goal, you have several options. You can simply transfer the funds back into your bank account or you could convert it into a Macy’s gift card. If you decide to convert it into a Macy’s gift card, you get your goal amount plus 12%. Macy’s is by far the most generous but there are other vendors such as Barnes & Noble (5%), Bed Bath & Beyond (4%), iTunes (2%), The Home Depot (3%), and more.
This can significantly boost your savings’ interest rate.
FDIC Insured
Your money at SmartyPig is FDIC insured up to $250,000 as the funds are held at West Bank, which is itself a 115-year-old subsidiary of West Bancorporation (WTBA). Anytime you are looking at a bank, and SmartyPig is essentially a bank account, you need to ensure that your money is protected in some way by FDIC or NCUA insurance.
The final question, after you understand how it works and that your principal is protected, is whether getting 2.01% APY and a potential secondary pop if you convert to a gift card is worth the hassle. I’m discounting the social aspect of SmartyPig, where friends and family can contribute towards your goal, but everything else makes me think that it’s only worth it if you have a large goal in mind and can benefit from the gift card bonus.
I do like the idea of people savings towards their goals with a service like SmartyPig, rather than borrowing via store financing or a credit card. I think with the recession, a lot of people are reverting back to novel ideas like saving up for something. 
If you have personal experience with SmartyPig, please share them with in the comments below. I’m especially interested in any headaches or issues you may have experienced, I’ve learned that they seem pretty receptive to that and hopefully we can get any headaches resolved. If you have a great experience, please share those as well!
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An interesting twist on an old idea…
I did the math, if you put $300 a month into a 2% interest bank and NEVER touched it, at 10 years you will have $149,406.99!!! If you put the $300 a month under your mattress it would only be $36,000. You would need to pay taxes of course but pay that with your non-savings money. Just so you know the monthly interest at this point would be $2929.55. That could be a nice retirement fund.
P.S. 20 years would look like this $1,757,797.65 in the bank. $34,466.62 a month interest. Under the mattress would only be $72,000!!!
Uh, that would be great if the account paid 2% interest MONTHLY. At 2% annual interest, you would have about $40,000. That is $4,000 in interest over 10 years, not $113,407! Interest is good, but not that good!!!
I, too, was going to say that the math is wrong. You must divide your APR by 12 to get the monthly rate. At 2%, it would be .1667. $300 monthly for 10 years at 2% is $39,817. For 20 years it would be $88,443.
By the way, you would have to deposit $3,392 a month at 2% to have $1,000,000 at the end of 20 years.
Are you sure that all your math is correct?
If you put $36,000 in the bank with 2% interest rate annually, at the end of the 10th year you would have balance of about $43,000, because
36000(1+0.02)^10 = 36000*1.02^10 = 36000*1.22( roughly) = 43000
Therefore, if you put $300 a month in a 2% interest rate bank and never touched it, you would get more than $36,000 for sure, but not more than $43,000.
What do you think?
This looks like a GREAT idea! Certainly not for everyone, given the lack of liquidity… I haven’t taken a look at it yet, but the first thing that comes to mind is saving for Christmas/Birthday gifts. Thanks for the heads-up on this one!
Its like a layaway plan but better structured since you earn interest while you are saving away toward your goal!
I’m glad you are putting more emphasis on the gift card conversion than the mooching for money from your friends and family as a value add for SmartyPig. I found that aspect so off putting I never gave it another look. I’m not sure gift card conversion is worth the hassle of moving my money over there and I’m not interested in chasing slightly higher interest rates so I’ll probably stay put. At the same time, I salute their inventiveness in trying to come up with a product that they hope will make them stand out in the crowd.
That’s pretty interesting… Do you have to turn the whole amount into a gift card or could you put some towards a GC and some back to your bank account? I can’t imagine what someone would do with a $250 Itunes GC…
I questioned this also. It looks like you are now able to split up your distribution to your liking.
You don’t have to buy a gift card. You can just transfer the savings back to your bank account. You don’t even have to wait until you’ve reached your goal, even. The only thing about reaching your goal is that is when the automatic contributions stop. That’s it. You can cash out before, at, or beyond your goal. You earn the 2.01 (or whatever rate it is at the time) throughout.
The benefit of cashing out with a gift card is the bonus the retailer gives you. But you don’t HAVE to go that route.
Great concept! I’ve used it in the past just to catch the higher interest rate but I can beat that now with rewards checking. One issue I did have with SmartyPig is they don’t let you list a beneficiary. I called them and they explained it away with some legalese stuff leaving me confused about if my wife would have to partition the courts to retrieve the savings if something ever happened to me.
Sounds like it’s on the order of a Christmas club but with the end result a gift card instead of a check. Nice idea and inventive. Probably won’t do it though. =)
Since you can split up your distributions you can get a little extra Christmas money through the gift card bonuses also.
i do like the 2.01 apy…maybe i’ll use this to convince myself to save for something nice
I started using SmartyPig a few months back and absolutely LOVE it. I’ve made a number of my friends join. I thought the whole social networking aspect was kind of weird at first, but it’s kind of fun to try and ‘outsave’ your friends.
Also you’re able to transfer the entire amount back to your home bank account if you need at any time, so it doesn’t have to go into a gift card, though the whole gift card thing was great come christmas time.
All in all, I’d highly recommend SmartyPig to anyone looking for a fun, easy way to save!
I like the giftcard bonus idea. If you were planning on making a major purchase at one of those retailers anyway, you might as well get a bonus after you’ve met your goal.
With family able to kick in, this sounds like a cyber adaptation of Korean soo-soo accounts (which I’m sure I misspelled!). The main difference being with the soo-soo is that it’s a communal affair where the money can be used by anyone in the family who has a need.
Nothing in the world is really new it seems, it just wears a different face.
Thanks for this review. It sounds like a great way to save for something big (vacation, home improvement, etc).
Is there a minimum time you need to have an account open before cashing out with a gift card?
12% at Macy’s seems pretty generous. Maybe generous enough to warrant simply depositing, I dunno, $500, and immediately turn that into a $560 Macy’s card.
Pretty cool. Reminds me of what reviewer put down: “like a layaway plan”.Can you purchase several gift cards at one time?
We use SmartyPig and have been really, really happy with them.
It takes a few days to transfer the cash back to the bank, but that is even better than my linked savings account because we aren’t tempted to just borrow a little from this and a little from that account.
We’ve used it to save up for things like annual auto repair costs, our daughter’s adoption finalization, vacations and other things.
I’ve never even used it to buy a gift card and I’m thrilled with it. I also love that it automatically does the transfer from my primary account into the SP account.
I set a goal–how much by when, and it does the calculation of how much to withdraw. Then I just put that amount in my budget each month and SmartyPig takes care of the red tape.
This is also great for fundraising–like kids’ college savings (until such time that it’s enough to roll into a higher-yield acct) and adoption savings, which often friends and family want to pitch in on.
I’ve never even heard of this, but it just doesn’t sound compelling enough to sign up. I would find it so much easier just to save with an ING account.
Nice round up of SmartyPig—we recently signed up and are using it to save up for Christmas 2010
Since we usually make a big Amazon purchase anyway, the 4% bonus is going to be great!
Be careful on your 1099 forms if you have more than one account at Smarty Pig–we have two accounts. Interest on the first was $500; interest on the second should have been $800 but they combined the two amounts and reported interest on the second account at $1300 instead of $800. I must say they were extremely quick to fix it once it was pointed out
Beware of smartypig.com! Lawyers can compound a tragedy.
There is no right of survivorship on smartypig.com co-owner accounts. This is crazy. People do die. Accidents happen. Customers need to be able to give a co-owner the right to receive the money from our account in the event of our death or incapacity.
Who can afford to put any substantial sum of money into a smartypig.com account without right of survivorship? If the worst happens, whatever money you have will go to pay a lawyer to get your money out of smartypig.com while smartypig.com hangs on to your money for months or years. Guess that makes the people who established smartypig.com the really smart pigs.
Other online banks like Discover Bank allow beneficiaries and true joint accounts. What’s Smartypig’s excuse for not being responsive to the needs of its clients? From what I have read on their blog and elsewhere on the internet people have been asking this question for more than a year with no movement toward a positive resolution by Smartypig and its owner West Bank.
I just verified this. I called West Bank and they don’t currently have a way to add beneficiaries. Too bad,
. I’m going to FNBO Direct to open an Interest checking account instead.
From smartypig’s FAQ page: 13. Can I add a Payable on Death (POD) Beneficiary to my SmartyPig profile?
Yes, you may add a Payable on Death (POD) Beneficiary to your SmartyPig profile. Only one (1) U.S. Citizen over eighteen (18) years of age is eligible to be a beneficiary on a payable on death account. You may add a POD Beneficiary during the registration process, or by going to the “Edit Profile” page in your SmartyPig profile.
How does smartypig make money?
The deposits go to West Bank, who (I assume) makes money on them like any bank would.
I heard that SmartyPig is going under. They are about to lower their interest rate to 1.30%, which is no better than a lot of other banks, just to stay afloat.
Where did you hear that? I heard they’re doing great.
Do you have to have automatic deposits or can you have your bank send checks to deposit in the accounts. I save based on percentages of the money I bring home. This number varies and I would like the freedom of sending the amount I want when I want. I am just really in it for the good interest rate not the help saving.
Each goal has a minimum automatic deposit of $10/month. The amount is calculated according to the size of the goal, the completion date, and the current interest being earned (so “save 1200 in 1 year” would be approx $100/mo, less 2% interest earned).
In addition to the automatic deposits, you can also add more money manually through the smartypig site, but you can’t push money from your bank directly because smartypig accounts/goals do not have the required account number to do that. I wish they did…
To clarify on the auto deposit calculation, if the interest rate changes then your auto amount will still remain the same until you go in and change the goal’s settings, at which point it’d recalculate the deposit according to the new rate.
I currently have over 20K in my savings account with ING direct.. The APY is now at 1.10 and SmartyPig is near 2%.. I’m not charged anything by ING direct and would it be the same if I created an account with SmartyPig and transfer money like I do back and forth from my checking account with no charges also?
This is perfect! I don’t really WANT too much liquidity as i’m saving for a new home. I don’t want to have too much access to it. Great idea! I’ll look into it more….Thanks Jim!
I attempted to open a Smartypig account but for some reason failed their test to confirm my identity. Now they want me to fill out some paper and mail it back.
If I cant do it all online, its too much of a hassle. I’ll find another savings vehicle.
Since after reaching your savings goal automatic contributions stop and interest continues to accrue, if you want to be able to have as much liquidity as possible you should set your savings goal very close to your initial deposit.
Looks like a great way to save. One comment I saw on another site is that they don’t allow you specify a beneficiary on the account & it might be costly to get the money to get out in the event of the account owner’s death. Any thoughts?
They now allow you to set up a beneficiary. You should check it out again.
I called Smartypig’s number listed on the website and had questions about right of survivorship. They took my name and number and had a rep from West Bank call me. I just got off the phone yesterday (20 April 2010), and was informed they just added that benefit to the website. It is automatically part of the registration now. I haven’t done it yet, but it sounds like i will be able to get my wife added as the recipient of the funds should i die before i withdraw them.
ALSO, the rates and structures of rates has just changed. For accounts less than $50,000 the rate has gone up to around 2.5%, and for accounts over $50,000 the rate drops to around 0.5%. This will go into effect sometime next month, or in June. When asked why this is the case, the rep from the bank explained their intention is to benefit the little guy who is trying to save for goals (as opposed to a service for people to just park large sums of money).
I guess within each account, multiple goals can be set up, but only as long as the sum of the goals is less than $50,000 (including any earned interest mind you) will the higher rate be earned.
I’ve used it… I saved for a new LED TV as well as a trip to Las Vegas. I’ve cashed both of those out (transferring back to checking account) with no hassle.
I continue to maintain an account for Car Repairs.. which I haven’t had to touch yet.
Now, I’m starting to save for a trip to Europe in 2012. I will continue to stand by smarty pig!
I have been thinking about moving my savings to smartypig and setting up about 6 goals. After reading your review Jim, I am not sure I should. You state that in order to qualify for the 2% interest rate you have to contribute at least $10 a month. Is that per goal or per user account? I’ll have to do some more research to find out, but if anyone knows the answer let me know. Thanks.
Actually, they don’t require automatic contributions anymore. Now, you can choose from different options for the automatic contributions.
This company has one fatal flaw IMO. Yes, they have very competitive rates, yes, they have interesting features which assist you in organizing and staying current with savings goals. Here’s the problem, if there is anything remotely time sensitive about your goals, and you aren’t very careful you might end up royally screwed. Here’s the issue:
1. You are REQUIRED to fund the account every month. You may NOT opt out. You have flexibility to alter the amount of the contribution, but you may not pre-emt it. It’s going to happen and once it does, your funds are locked in place. All of them are locked in place. In my case currently a monthly contribution of $29 was scheduled to occur on the 1st. It didn’t happen till the 3rd. Now when I try to close a savings goal totaling over $28,000, I’m told I may NOT close it out and have access to any of my funds until that tiny transfer of $29 is completed on the 10th!!!
This is odd because according to their own faq, “ACH transactions take 3 business banking days to clear. SmartyPig defines funds as having cleared once SmartyPig has collected the funds and has full use of the funds.”
When I finally get my money, I’m through with SmartyPig. However they may not be through with me. I’ve been saving these funds for 2 years for a surgery. If I miss it now because I’m unable to fund it in time, they WILL be hearing from my attorney. No company should be allowed to hold YOUR money hostage for such trivialities. This isn’t a CD. It’s a savings account.
Actually, you are incorrect. When you set up your goal with SmartyPig, you can choose “None” for the recurring contributions so nothing will be taken out each month.
And, they do require you to wait around 4 days after the funds post to your goal because your bank could go in and reverse those funds at anytime during those 4 days. So they would have given you money that your bank took back. I don’t blame them for making you wait.
I’ll stand corrected on the issue of monthly withdrawals. I have to assume that this is a feature that was recently added. I had a long exchange about this very subject with them when I opened this account because the way my monthly accounting works I didn’t want to have to plan for X amount to be in my source account on some particular day. I most especially didn’t want an automated payment to accidentally trigger a costly overdraft from my bank. I was told by their support that this is not a plain savings account and is instead structured for mandatory savings so some amount would have to be transferred to them each month. It was suggested to me that I set my goal’s time line 50 years in the future to ensure that only the most trivial amount would be deducted each month which is what I did. I then subsidized that with much larger manual contributions when I was ready to. I just checked, and you are correct those auto debits can now be stopped entirely. I wish I’d know because I would have turned them off a long time ago. They were truly annoying to me, and knowing about it would have spared me a huge amount of stress.
As for the wait time, I’m sorry but you’ve not considered carefully my real complaint. It wasn’t that the new speculative funds were an issue for me. I really didn’t care about $29 or whatever. I’d have been more than content to let them hold that. I was upset that they would freeze 1000 times that amount which had been accumulating for almost two years. They aren’t doing this because there is a risk of those funds being bogus. There is another reason, and frankly I don’t care what it is. I don’t care what the mechanism is they are using to make money off of my money as long as they aren’t taking it to vegas. That’s their business, and it quite possibly has something to do with the comparatively high return they offer. Additionally you mention the span of 4 days, but as I think I pointed out, the span in question was 11 calendar days from the time the monthly debit was scheduled, that’s more than a third of the month.
I just think they should be a bit more forthcoming in synthesizing all of their restrictions into one concrete example so that people are well aware of the ways in which this account differs from a conventional full access savings account. I’m not the only one who misunderstood this policy because I found many examples online where people thought they could take out their money any time, and it isn’t so. In fact I am the only person to my knowledge that has made this observation in a review. This fact can have very negative implications for a person and it needn’t be so if the person is adequately warned.
Thank you for this review. I wondered about this feature as well. I currently have a small account with them, but I get an uneasy feeling, as I do not see an obvious and visible link to have my money transferred back to my account whenever I please. I have shortened the length of the savings goal as a result.
That is one feature that I like about ING, although the rate is currently very low you are able to have access to your funds whenever you wish to have the money put back into your bank.
If you turn off auto transfers and just contribute manually to the account than you won’t run into the problem that I did. Just make sure that you know before you manually initiate a contribution that doing so is going to lock up your account for a period of time so if there is a chance you’ll need it, then don’t make a contribution.
Getting your money back is straightforward. All you have to do is to close the goal, and be sure and pass through the screens where they offer to put your money on a spending card (unless that is what you wish to do with it). Then you are presented with the option to return the cash to the same account that was used to fund it with originally. I don’t know what they do if the original funding account is closed.
Old post, but I bought a trip to Europe with a credit card that has 0 interest till February 2011. Between now and February 2011, I set up my Smarty Pig account so that when the final bill is due I can pay it in full! I’m just paying minimum due amount for the time being. Smarty Pig is like my discipline.
Before doing business with a financial institution, you should always check up on it. The bank that is behind this product is NOT in the best financial health right now. Even if it is FDIC insured, it takes a lot of time to collect on your funds if the bank goes into a receivership. This is advice from someone who has gone through this in the past. ING and some of the others mentioned here are in much better financial shape.
Wut is up with the smartypig website?? It’s been jacked up for about 2 days straight now. Can’t login. RED FLAG!!! dont think i will b dealing with smartypig n e more.
Their front page website has been jacked for a few months now. I pointed this out in an email to them a month ago and had no response or solution done for it. Poor quality if you ask me.
Smarty Pig SUCKS – you can’t withdraw partial funds –
if you want to close a goal you can only deposit back into the account the money the account came from even if you have done transactions with other banks with them. POORLY DESIGNED – Customer Service were really RUDE too the lady started yelling at me. RUN don’t walk away from Smarty Pig.
Love it so far!
I’ve been a champion of Smarty Pig for some time now. I think their features are bold and that they have led the way for the future of online banking.
But sadly, since this post almost a year ago, Smarty Pig had dropped their interest rate twice now. It’s now at 1.35%…which isn’t bad, but not stellar, either. Other banks give higher returns.
While a lot of their features are quite innovative, I’m not sure if they will compensate for the decreased interest rate for me, so I am considering moving my money to another bank!
what others banks have better APY’s than smartypig?
Which banks give a higher return than 1.35%? It seems to me like all brick and morter banks give less than 0.5%, While ING gives 1.10 apy and Ally gives 1.20%.
My current bank only gives me 0.01% and I want to move my emergency fund to some bank to at least keep with the pace of inflation.
HSBC gives 1.0% APY.
I have been with them for years and not had a single problem with them.
HSBC just lowered their rate to 0.90%. Soon, you will have to pay them to keep your money!
I was just about to sign up for a SmartyPig account when I found this little tidbit in their small print: interest is credited and compounded QUARTERLY. So, they may have one of the higher interest rates in town (currently 1.35%), but my AMEX savings account (currently at 1.15%) will grow at a slightly faster rate due to it’s monthly compounding policy. Do the math and let me know if I’m wrong about this
You are correct in saying a monthly compounding is better than quarterly, but with the interest rates you have given, the 1.35% quarterly is still a better interest rate than the 1.15% monthly compounding. With interest rates so low though, the effect seem moot.
Just so you know the math behind: if you put 1000 into an account with 1.15% compounded monthly, after 1 year you would have 1011.57. After 2 years, 1023.26. In the account compounded quarterly, after 1 year, 1013.57, after 2 years, 1027.32.
I know, sounds minimal but the higher interest rate wins here.
Stay AWAY from Smartypig! These guys are serious bad news. I tried to close an account with them and they made me wait 9 business days!! I had over $41,000 with them in deposits and I tried to close the account – but they held it up because they needed 9 (that’s NINE) business days to verify whether a recurring (get this) $10/month fund deposit would in fact clear. When I explained that they were holding $41,000 that I needed access to within 5 days hostage for $10 (which they could simply credit back or hang on to for all I care), they SO could not care. stay away from this bunch – quite rude and inflexible. Oh and their wbesite really works hard to hide their phone number from you….
Agree with Bradfrd above – they seem to take an inordinate time to close your account and get you your $. Calling them to complain gets met with not even a polite get lost. You can do better
It’s true about dying and loosing your money – if the account is not in trust or some other legal mechanism – it will go through probate and your family will get pennies on the dollar. THIS IS A MAJOR HOLE – CONSUMER BEWARE
Sooooooo, that’s how they make their money. They are banking on people dying with a massive savings built up. I knew this was too good to be true.
how does smartypig make money!??!!?!??!?!
they collect intrest of holding your money just like any other bank
I have a friend who opend an account up for their adoption fund. I would rather make a deposit to their SmartyPig fund than buy them a gift I have to pay shipping on. I think this is a great idea for adoptions, college funds, weddings, or even buying a home. I see the glass half full, it’s a great idea. It’s almost like friends and family taking care of each other without really even noticing it.
When withdrawing money from Smarty Pig, be sure to allow a very long time for receipt of the money in another bank account. Their policy is to make you wait (usually 2 weeks or more) until the next automatic payment has cleared the account. Even if you create another account, the policy holds. It stinks when you need the money quickly.
The interest rate has dropped dramatically, so it is no longer a good deal. There must be better ways to save and get a good interest rate. Who knows of one?