Tiered-Rate Account

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DEFINITION of 'Tiered-Rate Account'

A checking or savings account that pays interest in increasingly higher amounts as the account balance increases. Each tier corresponds to a range of account balances and interest rates earned by the customer if his or her balance falls within that range.

For example, the first tier may include balances of $2,500 to $10,000 and pay 1% interest; the second tier may include balances of $10,001 to $17,500 and pay 1.15% interest, and the third tier may include balances of $17,501 and up and pay 1.3% interest.

BREAKING DOWN 'Tiered-Rate Account'

A tiered-rate account may have a minimum required balance to open an account and a minimum average daily balance required to earn interest. Banks are free to choose the number of tiers they offer and what interest rate they will pay for each tier. A checking or savings account is often not the best way to earn interest, however, especially on large balances.

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