SmartyPig, a company which offers a goal based online savings account, increased their interest rates for customers that have account balances of under $50,000 to 2.15% last week.
The Des Moines, IA-based company will now be offering two tiers to its savings accounts. Customers with balances under $50,000 will earn one of the best interest rates on an FDIC insured account available. Customers with balances over $50,000 will earn 0.5% on their money, which isn’t competitive compared to other FDIC-insured online savings offerings.
SmartyPig said on its blog that the new “tiered structure will greatly benefit more than 95% of our customers who are working hard towards their goals and using our redemption program to earn even more cash when they reach those goals.”
In essence, SmartyPig is subsidizing the interest rates of its accountholders that have smaller balances by cutting back on the amount of interest that they are paying to some of their biggest account holders.
“While a small portion of our users will see a rate decrease based on their limited use of the service, we feel strongly that our mission will greatly benefit our core customers who are saving for various milestones in their everyday lives”, wrote the company in a blog post on its website.
According to a press release by the company, “SmartyPig is a consumer finance site where individuals and families can earn high interest on their savings goals while receiving cash back rewards when they make a purchase. With tools that help manage progress, SmartyPig offers a smart, simple and secure approach to saving for a specific goal like a honeymoon, home remodel or a new iPad by offering additional incentives like cash boosts of up to 12 percent from best-in-class retail partners such as Best Buy, Home Depot, Travelocity and Macy’s.”