Many Americans want a simple savings product that pays a good interest rate, allows them to set one or more goals, and can be used without a lot of hassle. SmartyPig is a contender for this target audience. It is the online-only savings account product of Sallie Mae Bank, a subsidiary of SLM Corporation.
Sallie Mae has evolved considerably since its launch in 1972 as a government-sponsored enterprise offering student loans. It became a private company in 2004, and spun off its loan portfolio and servicing operation in 2014 into Navient Corporation, a publicly traded company. The remaining entity became SLM Corporation, which now offers a variety of savings and lending services, especially private student loans. The Sallie Mae Bank subsidiary offers several savings products, including the SmartyPig online piggy bank.
Created in 2008, SmartyPig allows savers to set up online no-fee savings accounts. All accounts are insured by the FDIC. The current SmartyPig online platform is a trademarked product of Q2 Software Inc., which provides digital banking solutions for thrift institutions. Q2 announced its partnership with Sallie Mae on Dec 14, 2016, replacing an earlier online platform.
When you sign up with SmartyPig you get a primary account that accepts deposits and withdrawals online. You are required to identify one external funding source, which SmartyPig will verify by making deposits. You can then choose to open savings goal subaccounts for specific purposes and transfer money to/from the primary and goal accounts. You can set (and change) time deadlines and savings amount targets for each goal subaccount.
Setting Up and Using Your SmartyPig Account
Applying for a SmartyPig primary account is easy. You must be at least 18 years old and have an existing checking or savings account. You must also have legal U.S. residency status, either as a citizen, permanent resident alien, or resident with Social Security number. The online process takes only a few minutes. You’ll be asked to give personal information, including your Social Security, driver’s license, and external account numbers.
SmartyPig verifies your external funding account by making two small deposits into the account and a debit to reclaim the money. You are notified via email when the money is deposited, and then you have two weeks to verify the deposit amounts with SmartyPig. Once your SmartyPig account is verified you can begin depositing money. You can also set up a direct deposit from your paycheck on a bi-weekly or monthly basis. The funds you contribute to your savings account are held for five business days before they are released. Once released, you can transfer funds freely to any of your goal subaccounts.
SmartyPig pays interest from the first business day on which your deposit is received. The current interest rate structure is:
- 1.05 percent APR on balances of $0.01 to $10,000
- 1.15 percent APR on balances above $10,000
The maximum savings account size is $250,000. Interest is compounded daily and posted monthly. You receive your full daily interest on your funds until you withdraw them, even mid-month. You are limited to six monthly withdrawals from each of your goal subaccounts and your primary account. Overdrafts are not usually honored, but might be allowed at the discretion of SmartyPig, and may involve fees.
SmartyPig pays a $10 bounty for each successful referral you make, up to a limit of $1,000.
You may withdraw funds directly to your external funding source or may use the money to buy Amazon.com gift cards (once your account has been open for 60 days). At one point it appears that discounts were available when you bought gift cards, but the current Terms & Conditions makes no mention of these discounts. You can withdraw a maximum of $50,000 a month.
You can name a joint account holder and/or a beneficiary. Naming a beneficiary makes your account a Payable on Death account, allowing your money to be distributed without undergoing probate.
A unique feature of SmartyPig is its social sharing platform which allows you to announce your savings progress and even lets family and friends to contribute to your account.
A Good Choice
In general, SmartyPig offers higher rates than those available at brick-and-mortar banks, but not the highest among online banks. It uses a friendly online portal with the ability to manage your primary and goal accounts. SmartyPig appears to be a good way to get you into the savings habit, and its no-fee structure is easy on your wallet.