ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A tiered-rate account is a bank account that pays different rates of interest, depending on the amount of the funds held in it. It can be any type of account but usually is either a money market or a savings account.

Detailed explanation-2: -Tiered interest rates mean the amount of interest earned depends on the account balance. For example, a balance of $10, 000 will earn a higher interest rate than a balance of $2, 500. Customers are usually required to deposit a minimum amount to open a money market deposit account (typically $1, 000).

Detailed explanation-3: -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.

Detailed explanation-4: -Tiered Dividends and Yields Your balance tier determines the daily dividend rate and annual percentage yield on the daily account balance. The rate is variable, and may change at any time after the account is opened. Fees could reduce dividend earnings.

Detailed explanation-5: -There are two methods banks use to calculate interest on tiered savings accounts: Whole Balance Method-The bank pays interest on the whole balance at the highest tier reached. Partial Balance Method-The bank pays a different interest rate for each tier of the balance.