Social Group Savings with SmartyPig

SmartyPigWhen SmartyPig first debuted, they had a bunch of expensive fees that made me sour on the otherwise good idea. To their credit, they made a lot of changes and turned a great, albeit expensive, idea into a great idea that I’m surprised more people don’t know about (then again, a lot of people don’t know about ING Direct and they’ve been around for a very long time!).

In a nutshell, I think the best description for the service is social savings with a nitro-boost at the end. The mechanics of the site are simple. The first step is to set up some savings goals, which can be of nearly any size (you only earn 2.15% on balances under $50,000), and then you start saving. When you hit your stated goal, you can withdraw it or convert it into a gift card to take advantage of the boost. As you’re saving, it earns an above market rate of interest and you can close it anytime you want if you change your mind.

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SmartyPig Raises Interest Rate, Adds Tiers

Piggy BankIf you have a savings account at SmartyPig, 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.

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:
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SmartyPig Review

SmartyPigNot 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.

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 Personal Finance 

SmartyPig’s Exhorbitant Fees Help You Save

Since this writing, SmartyPig has removed many of the fees associated with their accounts and so is not as bad as this post makes them out to be.

If you read any other personal finance blogs, you probably have seen a lot of posts about this new type of savings called SmartyPig, run by West Bank. They bill themselves as a different kind of bank account and they’re sporting a pretty healthy 4.30% APY savings account, until you realize that they’re charging you some ridiculous fees!

Here are the fees from their Terms & Conditions:

  • Contributing funds to a public account via ACH, Electronic Check and Credit/Debit Card, a $4.95 processing fee per contribution will be charged to the purchaser.
  • Purchasing a physical or electronic gift card via ACH, Electronic Check and Credit/Debit Card, a $4.95 processing fee per card will be charged to the purchaser.
  • Unsuccessful attempt of transfer of funds, $25.00 per occurrence will be charged and debited to the customers ACH bank account.
  • Replacement of a lost, stolen or discarded SmartyPig MasterCard® Debit Card is $20.
  • Requesting funds on a check in lieu of placing funds from a Savings Goal on the SmartyPig MasterCard® Debit Card or Retail Gift Card will incur a $25 processing fee. To complete this transaction, the Primary Account Holder must contact SmartyPig Customer Support. Not available to minors. Waived when required by law.
  • Overdrawn accounts will be charged a $27 fee per overdrawn item
  • I’m not going to rehash the point and purpose behind SmartyPig, for that you can hit up one of the posts above, but to the untrained it eye it sounds a whole lot like you’re paying a lot for the opportunity ($5 each time someone contributes, how does that motivate saving?) to help someone save. Not only that, but the end product isn’t even an ACH deposit into the saver’s account, it’s a debit or gift card (minus $4.95)! (if you want an ACH transfer of funds, that’s $25 please)

    This seems like a raw deal, is anyone else seeing this differently? (though do enter those contests for a free $100)

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