The End of High Interest Savings? How SmartyPig Savings Account Rates Compare

smartypig interest ratesHigh-interest savings accounts have been the modern day vehicle driving America’s households to keep money in a savings account and capitalize on compounding interest rates. SmartyPig has been a long-standing leader in offering better savings account rates nationwide in comparison to its competitors.

However, since 2009, SmartyPig interest rates have been on a steady and steep decline.

The most recent SmartyPig interest rates reduction occurred Dec. 2011, resulting in SmartyPig’s once esteemed savings rates to dwindle to a mere 0.70% APY. This figure is far from SmartyPig’s golden savings account rate of yesteryear–prior to August 2009, SmartyPig interest rates were at an impressive 2.75% APY.

During the month of August 2009, however, the down economy rained on SmartyPig’s high-yield parade with an interest rate drop to 2.01% APY. While this was a significant decrease, many SmartyPig customers remained loyal as it was still one of the better savings account rates around.

Unfortunately, subsequent interest rate reductions continued to hit customers and their savings accounts:

  • Sept. 2010: Savings account rate drops to 1.75% APY
  • Jan. 2011: Rates fall to 1.35% APY
  • June 2011: Interest rates decline to 1.10% APY
  • December 2011: The online savings account offers just 0.70% APY

The climate for high-yield savings accounts is clearly not what it once was, as most national high interest savings accounts have followed suit falling below the 1% mark.

Factors Causing SmartyPig Interest Rates to Drop

As hard as it may be to hear, the drop in SmartyPig interest rates may not be wholly in the company’s control. External factors often play a hand–albeit in the background–in how financial institution’s deposit rates, like savings account rates, fluctuate up or down.

Economic Effect: While some loosely attribute any random sign of hard times to the economy at large, economic tribulations do in fact have an indirect effect on dropping SmartyPig interest rates. In a downward economy, people are more reluctant to borrow money. In turn, financial institutions can’t afford to pay out high interest rates as they’re not earning as much in interest from loans.

Federal Reserve: As a cyclical response to the decease in borrowing, the Federal Reserve issues financial institutions low-interest rate loans and has driven interest rates down in the process. Financial institutions typically adjust deposit rates like savings accounts to closely reflect the Fed’s current rate.

The Fed has expressed that the economy has yet to “settle” in a way that would indicate an upward turn for deposit account interest rates. Despite the reality of poor returns from SmartyPig interest rates, there are still better savings account rates offered by other national, online and local institutions.

Savings Accounts that Earn More

With SmartyPig interest rates displaying a painful pattern of continuous decline, depositors may be better off transferring funds into savings accounts that earn more returns. Despite interest rate drops across the board, there are still better savings account rates that can make the most out of your money:

  • Online: Ally Bank at 0.89% APY
  • Local: Houston Police Credit Union at 2.02% APY

Like SmartyPig, a significant number of financial institutions have dropped their savings account rates below 1%, but some national and online entities still hover relatively close to that mark, giving depositors hope for better interest earnings.

Additionally, some local-level institutions still maintain a competitive edge with savings account rates that mirror those from a few years ago.