SmartyPig made two announcements last week, one loudly, the other softly. The soft one was arguably more important: the online saving website said it will cut the interest rate it pays on savings accounts for the second time in four months, this time from 1.75% to 1.35%. The announcement was initially made only to members when they opened their accounts; later the company sent out an e-mail.
“This innovative tool makes management of your SmartyPig account a snap while you’re on the go with a speedy interface for reviewing your goals, adding money and reviewing recent transactions,” Michael Ferrari, SmartyPig’s co-founder and COO, said in a blog post.
Everybody’s got an iPhone app these days. But for almost a year, SmartyPig stood out for having the best interest rate on savings accounts anywhere. Its rate of 2.1% made it was one of just a handful of companies to offer anything near two percent.
The company first dropped its rate to 1.75% in September. Its cut to 1.35% is effective immediately. The new rate makes SmartyPig’s rates comparable to other online savings sites like Sallie Mae and American Express, and still far above the average rate of .64%, according to a weekly index by Bankrate.com.
SmartyPig’s spokeswoman didn’t return our call seeking comment. But when the company explained its previous rate cut, CEO Bob Weinschenk said in a blog post that it “is being reduced as a result of these same economic conditions” that caused other financial institutions to reduce their rates, including the recession and the Federal Reserve’s slashing of the prime interest rate to historic lows.
Even while offering rates that are merely good, as opposed to amazing, SmartyPig stresses that consumers who use its services are still better off than savers anywhere else because of the price reductions and cash back SmartyPig users get from some retailers when they achieve their goals and buy the item they’ve been saving for. Retailers including Amazon, Travelocity and Lowe’s give SmartyPig customers gift cards with up to 14% cash back. The company also offers a prepaid debit card with low fees and that gives cash back, rare features for such cards, according to our previous story.