Tiered Interest Savings Account Definition
How Tiered Interest Savings Accounts Work
Advantages and Disadvantages of Tiered Interest Savings Accounts
Alternatives to Tiered Interest Savings Accounts
Frequently Asked Questions About Tiered Interest Savings Accounts
Definition of Tiered Interest Savings Accounts
Tiered interest savings accounts are deposit accounts that pay progressively higher interest rates as your savings balance increases. In other words, if the funds in your account exceed a certain balance threshold, the account qualifies for a higher interest rate.
How Tiered Interest Savings Accounts Work
Tiered interest savings accounts work by rewarding savers who keep larger amounts of money in their accounts. The Truth in Savings Act requires banks to disclose the interest rate and the corresponding annual percentage yield that you can earn at each specified level of balances.
Advantages and Disadvantages of Tiered Interest Savings Accounts
Advantages of tiered interest savings accounts:
- Opportunity to earn a higher interest rate
- Ability to grow funds faster
- Low risk
Disadvantages of tiered interest savings accounts:
- Your money might earn more interest elsewhere
- Requires a large account balance to earn the highest rates
Alternatives to Tiered Interest Savings Accounts
There are alternatives to tiered interest savings accounts, but they also come with their own advantages and disadvantages:
- Certificates of Deposit (CDs): Savings accounts that lock your money for a fixed period and pay a higher interest rate.
- Government securities: Government securities are an alternative to tiered interest savings accounts that can pay higher interest, depending on the bond’s maturity.
Frequently Asked Questions About Tiered Interest Savings Accounts
What is a tiered interest savings account?
Example of a tiered interest rate?
Is it better to have a savings account or to invest?
Source: https://www.thebalancemoney.com/tiered-rate-account-5220479
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