What does it mean when money market accounts have tiered interest rates?
It's also common for these accounts to have tiered rates, meaning higher balances are rewarded with a higher APY.
A tiered-rate account is a bank account with different interest rates assigned to different balance ranges. Typically, you find tiered rates on savings accounts, but they are also a feature of some money market accounts, certificate of deposit (CD) accounts and interest-bearing checking accounts.
A tiered savings account offers a higher rate of return the higher your balance is. If you have a large savings balance, using a tiered account can help your money grow while keeping it liquid and protected by federal deposit insurance.
Money market accounts have variable interest rates that can fluctuate daily. If you're looking for certainty that your money will always earn a higher rate, CDs can be a better option, especially if you can afford to leave your money untouched for a set period of time. Balance requirements.
Many accounts have monthly fees
Another drawback to remember is that while they have high yields, money market accounts can also come with cumbersome fees. Many banks and credit unions will impose monthly fees just for the upkeep of your account.
With a tiered savings account, you'll earn a higher interest rate as your balance increases. That can help grow your money at a faster rate, especially if you have a large amount saved.
- Northern Bank Direct – 4.95% APY.
- All America Bank – 4.90% APY.
- Redneck Bank – 4.90% APY.
- First Foundation Bank – 4.90% APY.
- Sallie Mae Bank – 4.65% APY.
- Prime Alliance Bank – 4.50% APY.
- Presidential Bank – 4.37% APY.
- EverBank – 4.30% APY.
Tiered-rate accounts work by offering different, or "tiered," rates of interest for different levels of account savings, escalating the rates with the balance. For instance, a bank might offer five fixed-interest-rate tiers on its money-market account, all linked to how much you deposit init.
It's also important to keep FDIC limits in mind. Anything over $250,000 in savings may not be protected in the rare event that your bank fails.
How to choose a money market account. Look for a money market account with a high interest rate and no monthly fee. The account should also have a low minimum balance — less than $1,000 is often attainable. Some institutions require $10,000 or more to earn the best rates or avoid a fee, while others have no minimum.
How much will $10,000 make in a money market account?
Currently, money market funds pay between 4.47% and 4.87% in interest. With that, you can earn between $447 to $487 in interest on $10,000 each year. Certificates of deposit (CDs). CDs are offered by financial institutions for set periods of time.
- Quontic Bank: Earn up to 5.00% APY.
- Redneck Bank®: Earn up to 5.05% APY.
- Republic Bank of Chicago: Earn up to 5.21% APY.
- Sallie Mae: Earn up to 4.65% APY.
- UFB Direct: Earn up to 5.25% APY.
- Vio Bank: Earn up to 5.30% APY.
- ZYNLO® Bank: Earn up to 5.00% APY.
Six to 12 months of living expenses are typically recommended for the amount of money that should be kept in cash in these types of accounts for unforeseen emergencies and life events.
If you want to maximize how much interest you earn on your savings, a money market account can be a good option compared to other savings accounts because it usually earns a higher rate of interest. Plus, if you need quick access to your money, you can do so in a variety of ways.
Income earned from money market fund interest is taxed as regular income, up to 37% depending on the investor's tax bracket. While some local and state taxes offer breaks on income earned from U.S. Treasury bonds, federal income tax still applies.
First and foremost, money market accounts are typically safe because they're insured by the federal government. If you open a money market account at a federally insured bank, the Federal Deposit Insurance Corp. (FDIC) insures up to $250,000 of your cash per bank, per depositor.
A stepped-rate account is an account that has two or more interest rates that take effect in succeeding periods and are known when the account is opened. A tiered-rate account is an account that has two or more interest rates that are applicable to specified balance levels.
Opening accounts at multiple banks is fine, especially if you like a specific account elsewhere or the bank doesn't offer everything you need. Remember that each bank you use means another account login to remember and another banking app to download and use.
Money coach and certified financial planner Ohan Kayikchyan says it can make sense for a household to maintain four accounts: one checking account for monthly recurring bills and another for variable expenses, plus one savings account for emergency funds and a second for other savings goals.
As of April 2024, no banks are offering 7% interest rates on savings accounts. Two credit unions have high-interest checking accounts: Landmark Credit Union Premium Checking with 7.50% APY and OnPath Credit Union High Yield Checking with 7.00% APY.
Can you get 6% on a CD?
You can find 6% CD rates at a few financial institutions, but chances are those rates are only available on CDs with maturities of 12 months or less. Financial institutions offer high rates to compete for business, but they don't want to pay customers ultra-high rates over many years.
Like other deposit accounts, money market accounts are insured by the FDIC or NCUA, up to $250,000 held by the same owner or owners. Money market accounts tend to pay you higher interest rates than other types of savings accounts.
Example. For example, you might be interested in opening a money market account. Your bank offers a tiered-rate option allowing you to earn 0.40% on the first $10,000 saved and 0.60% on balances greater than $10,000. If you had a balance of $9,000, you'd earn 0.40%.
Both savings and money market accounts have variable rates. Money market accounts can have tiered interest rates, providing more favorable rates based on higher balances. Some money market accounts also allow you to write checks against your funds, but may be on a more limited basis.
Millionaires don't worry about FDIC insurance. Their money is held in their name and not the name of the custodial private bank. Other millionaires have safe deposit boxes full of cash denominated in many different currencies.
