August 11, 2022

Bucks: Savings Bank Is Now Merely Average

It’s official: After cutting its interest rate for the third time in nearly nine months, SmartyPig’s rates are no longer the most attractive in the land of online savings accounts. The spectacled Pig is merely average.

Starting on June 15, the rate will drop to 1.1 percent for customers with balances under $50,000, while savers who hold balances of more than $50,000 across all of their accounts will continue to earn 0.50 percent. I’ve been documenting the rate’s steady descent — it stood at 1.35 percent in January and 1.75 percent last September. Before that, the rate was an impressive 2.15 percent.

American Express and Sallie Mae now offer online savings accounts that pay customers 1.15 percent, while ING Direct and Ally offer rates of 1.0 percent. Many of these banks also cut their rates in recent months, but the Bucks team, perhaps too idealistically, had higher expectations for SmartyPig.

I initially became a fan because SmartyPig offered two really attractive features for savers.Besides the alluring rate, the company also made it really easy to set up an automated savings plan for different goals. But while SmartyPig has some bells and whistles that its competitors do not — for instance, you can share your savings goals on social networks like Facebook and Twitter so friends and family can contribute — it’s also possible to set up multiple automated savings plans at online banks like ING Direct and Ally.

The Pig’s chief executive, Bob Weinschenk, reiterated that its behind-the-scenes banking partner, BBVA Compass, actually sets the rates, and said that there’s been a gentle but steady move downward among competitors. “Others moved down two to three months ago and we held out longer than anyone,” he said. “BBVA is still paying a top-tier rate and when rates move back up (hopefully) we’ll adjust accordingly.”

Meanwhile, Mr. Weinschenk has said that the company’s business model has simply evolved. Instead of rewarding customers with an especially enticing rate for a longer-term savings goal, it’s simply more profitable to reward customers who want to save for smaller goals and then buy something through one of the company’s retailer partners, for which they receive cash back (in addition to the interest earned in a savings account).

And, he said, SmartyPig has increased the cash back rate at a number of retailers. “So I would say that for most customers the rate cut is more than offset by the cash back.”

As for the Pig’s reloadable prepaid card, which provides cash back savings, Mr. Weinschenk said it’s experiencing “record sign-ups and record useage.”

What do you think of the latest rate cut? And if you’re a customer, do you think the card and other services are good enough incentive to keep your savings parked at the Pig?

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