What is a 'Tiered-Rate Account'

A tiered-rate account is 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.

RELATED TERMS
  1. Tier 1 Leverage Ratio

    The relationship between a banking organization's core capital ...
  2. Account Balance

    1. The amount of money in a financial repository, such as a checking ...
  3. Tier 2 Capital

    One of two categories by which a bank's capital is divided. Tier ...
  4. Tier 1 Capital Ratio

    A comparison between a banking firm's core equity capital and ...
  5. Common Equity Tier 1 (CET1)

    Common Equity Tier 1 (CET1) is a component of Tier 1 capital ...
  6. Basic Balance

    An economic measure for the balance of payments that combines ...
Related Articles
  1. Personal Finance

    What's Tier 2 Capital?

    Tier 2 capital is a category of supplementary capital that banks hold.
  2. Personal Finance

    Is Your Bank On Its Way Down?

    Find out how the Tier 1 capital ratio can be used to tell if your bank is going under.
  3. Personal Finance

    Explaining Tier 1 Capital

    Tier 1 capital refers to the core capital a bank must maintain in relation to its assets.
  4. Investing

    A Guide to Bank Accounts

    Find out which type of bank account suits your specific needs.
  5. Investing

    Money Market Accounts vs. Savings Accounts

    An interest-bearing account that pays a higher interest rate than a savings account and gives the account holder limited check-writing ability.
  6. Personal Finance

    Understanding Savings Accounts

    A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.
  7. Managing Wealth

    Checking Account Reviews: Chase Premium Platinum

    Which perks and services come with Premier Platinum and is it worth the cost to you?
  8. Investing

    Money Market Accounts with the Highest Interest Rates

    Money market savings accounts can offer higher interest rates than regular or even high-yield bank savings accounts – and perks like these.
  9. Personal Finance

    Find the Best Savings Account Rates

    You know how to spot the highest interest rate, but how do you really get the best deal on savings accounts?
RELATED FAQS
  1. What is the difference between tier 1 capital and tier 2 capital?

    Tier 1 capital is a bank's core capital, whereas tier 2 capital is a bank's supplementary capital. A bank's total capital ... Read Answer >>
  2. How can I calculate the tier 1 capital ratio?

    Learn about the tier 1 capital ratio, what the ratio indicates about a firm's capital adequacy and how to calculate a firm's ... Read Answer >>
  3. How can I calculate the leverage ratio using tier 1 capital?

    Learn about the tier 1 leverage ratio, how to calculate the tier 1 capital ratio and what this leverage ratio indicates about ... Read Answer >>
  4. What's the difference between a trial balance and a balance sheet?

    Discover what is included in a trial balance and a balance sheet, and learn about what sets these two accounting reports ... Read Answer >>
  5. Which is more important to a nation's economy, the balance of trade or the balance ...

    Learn how to differentiate between the balance of trade and balance of payments for international trade and why the balance ... Read Answer >>
Hot Definitions
  1. Risk-Return Tradeoff

    The principle that potential return rises with an increase in risk. Low levels of uncertainty (low-risk) are associated with ...
  2. Racketeering

    A fraudulent service built to serve a problem that wouldn't otherwise exist without the influence of the enterprise offering ...
  3. Aggregate Demand

    The total amount of goods and services demanded in the economy at a given overall price level and in a given time period.
  4. Fixed Cost

    A cost that does not change with an increase or decrease in the amount of goods or services produced. Fixed costs are expenses ...
  5. Blue Chip

    A blue chip is a nationally recognized, well-established, and financially sound company.
  6. Payback Period

    The length of time required to recover the cost of an investment. The payback period of a given investment or project is ...
Trading Center