Deposit Account & APY

Posted By: ahkcompliance

Deposit Account & APY - 03/04/19 07:46 PM

We are developing new checking accounts. We have a one that will be interest bearing. X% will pay paid on balances up to $1,000 and Y% will be paid on any balance over $1,000.

If the balance in the account is $1,500. X% will be paid on $1,000 and Y% will be paid on the remainder $500.

Looking at Appendix B to 1030, we are using Tiering Method B. Do we have to state the low and high APY?

Tiering Method B

An interest rate of ----% will be paid only for that portion of your [daily balance/average daily balance] that is greater than $----. The annual percentage yield for this tier will range from ----% to ----%, depending on the balance in the account.


If your [daily balance/average daily balance] is $---- or less, the interest rate paid on the entire balance will be ----% with an annual percentage yield of ----%.
Posted By: John Burnett

Re: Deposit Account & APY - 03/04/19 10:09 PM

Yes, for the higher balance tier, if it's a consumer deposit account. If you don't have a deposit ceiling for the account, you will have to use a fabricated upper limit for the Y% tier to calculate that end of the interest amount to factor into the APY formula.

Where things get weird is if you are paying more for the lower balance tier. The range of APRs for the upper balance tier will appear backward (higher for lower balances than for the upper balance limit).
Posted By: ahkcompliance

Re: Deposit Account & APY - 03/04/19 10:12 PM

Yes, we are paying more for the lower balance tier.

I got to wonder that as well and thought it may look odd. Our cutoff is $1,000. So $1,000.01 APY will be much higher than say $100,000
Posted By: John Burnett

Re: Deposit Account & APY - 03/05/19 02:42 PM

The APY for the $1,000.01 will be the same as the APY for $1,000.00. But the APY for the high end of that top balance tier will have moved downward, closer to the interest rate paid on the funds in the top tier.
Posted By: ahkcompliance

Re: Deposit Account & APY - 03/05/19 06:25 PM

Yes!

When I started working on disclosures I thought it looked weird but now it all makes sense! At least I know I'm not totally off my rocker smile