SmartyPig interest rate falls from 3.25% to 3.05% APY

I recently opened a savings account at SmartyPig.com, currently as an experiment. It was initially paying 3.25% APY interest. I logged in today and got the following notification about the interest rate dropping to 3.05% APY:

Effective April 1, 2009, the APY (annual percentage yield) on SmartyPig accounts will be 3.05%. This is an APR (annual percentage rate) of 3.02%. While interest rates have been trending lower, we believe this is still an extremely competitive yield for an account insured by the FDIC. Thank you for being a SmartyPig customer. We appreciate your business!

I am disappointed in the decline, but I do agree that SmartyPig still has one of the best rates around for a non-CD account.

I only have $100 in the account as a test, but after another month of experimentation and research I may start putting in a larger chunk of my cash savings.

One of the small "gotchas" I noticed is that interest is only credited quarterly. That is not a really big deal, I think, but it may matter for some people. I made my initial deposit four days before the end of the March quarter, so I ended up getting interest ($0.04 on my $100 deposit) credited four days later.

My next task is to see if SmartyPig is appropriate for parking cash amounts on the order of $10,000 to $100,000. Mostly, SmartyPig seems oriented as a tool for saving smaller amounts of money.

FYI, BankRate.com reports that Redneck Bank of Snyder, OK is paying 3.10% APY. GMAC Bank is paying 2.25% APY. DollarSavingsDirect.com is paying 2.05% APY.

-- Jack Krupansky