Smarty Pig Still Offers Competitive Interest Rate and High Redemption Bonus for Gift Cards, but New Interest Rate Tier Applies

Smarty Pig, a social banking site set up around savings goals, was previously introduced to BestCashCow readers in March 2008, just a few weeks after the banking site launched. The introductory APY at that time was 4.30% APY. That interest rate has since been cut in half, but it still offers one of the best rates available, but only for balances less than $50,000.

Smarty Pig now offers a 2.15% APY. However, in May 2010, Smarty Pig announced that if the combined aggregate balance of all funds deposited in a user’s profile exceeds $50,000.01 or more, the entire balance will only earn 0.50% APY. So, that $4,000 you’re saving for that trip to Europe will still earn the 2.15% APY, but the interest rate for that college savings fund that just reached a balance of $51,000 is now only earning 0.50%. This is rate structure is opposite of most other institution’s rate structures, which typically reward higher balances with higher interest rates.

If you’re saving for something that can be purchased on Amazon.com or another one of Smarty Pig’s partners, you can receive up to an extra 12% savings boost when that gift card is purchased with your Smarty Pig funds. Alternatively, you can have funds placed on a Smarty Pig MasterCard debit card or have it electronically transferred to your regular checking account. Smarty Pig will not issue a check unless there are special circumstances, and then a $25 check fee applies.

Smarty Pig can be a very useful savings tool, if you understand the rules. This is especially true if you’re planning to purchase something from one of the Smarty Pig partners as that $2,000 savings goal you just reached can be worth $2,240 on a Smarty Pig gift card. The amount you deposit in your Smarty Pig account is held in a separate account in your name at West Bank, and the funds are FDIC insured. On August 1st 2010, SmartyPig and West Bank will securely transfer your customer data and funds on deposit in your Smarty Pig account to BBVA Compass. Existing customers will have to opt-in for the bank change; new customers will be asked during the registration process to authorize the transfer of their funds from West Bank to BBVA Compass. Smarty Pig states they do not intend to change the interest rate after the transition on August 1st.