Many banks and credit unions offer outlandish offers to get attention and make their products stand out in a crowded marketplace. Credit cards offer 0% interest transfers to get new card applications, banks offer $400 bonus for opening new accounts. and high yield savings account online offer interest rates that can be double or even triple normal savings account interest rates at most banks.
How You Can Earn 10% Interest On a Regular Savings Account
A small credit union in Colorado is offering member 10% interest on what they call a Reverse Tier Savings Account. Whereas most savings accounts or money market accounts pay you higher and higher interest rates based on having more money in the account, this Reverse Tier Savings Account flips that paradigm on its head.
So, how does that work? It works just like any other account that pays a different interest rate based upon how much money you have int he account, except it pays the most on the lowest balance.
From $0 to $2,000, this account pays 10% interest.
When you go over that lowest balance tier, the interest rate drops to a still very respectable 3.50% interest.
From $2,001 to $5,000 this second tier pays 3.50% interest. If you put in even more money, you reach the third tier which, in following with the backwards theme, pays even less interest, just 0.30%!
- From $5,001 to $10,000 it pays 0.30%
- From $10,001 to $50,000 it pays 0.25%
- From $50,001 and above, it pays a lowly 0.10%
If this seems absurd, you’re not wrong, but it is very clever from a marketing standpoint. Any list of high-interest rate savings account is going to include one at 10%, and the credit union’s own marketing can have 10% interest in huge letters. Even if you aren’t looking for a new bank, you might give that number a second look.
The sweet spot is $5,000, where you’ll earn 10% on your first $2,000 and then 3.5% on the next $3,000 for a total blended interest rate of 6.75% interest on the overall account.
Very High Interest Rates On Very Small Amounts
This kind of marketing gimmick is not uncommon, but it is seldom presented in the manner. Rather, most financial institutions offer, in big, bold, giant letters a huge interest rate, and then in much smaller letters point out that the offer only applies to a limited amount of money. Whenever you see some high interest rate that is obviously not sustainable, a limitation of this kind always applies.
In a way, the Reverse Tier Savings account is really no different functionally than the standard version. Essentially, this offer is for 10% interest up to $2,000 with an add-on bonus of 3.5% interest for the next $3,000. Keeping any additional money in this account would be financially irresponsible. If nothing else, this same credit union offers 4.50% interest on a 4-month CD.
Before you ask, Red Rocks Credit Union is NCUA insured, which is basically the same thing as FDIC insured, except for credit unions instead of banks.
Can I Join Red Rocks Credit Union?
Of course, like all credit unions, to take advantage of a Red Rocks Credit Union Reverse Tier Savings offer you have to be a member of the credit union. And, like most credit unions it has several ways to qualify as a member, from living in certain areas in Colorado to working for certain companies. And like virtually all credit unions there’s a loophole way into membership. In this case a one-time donation makes you a member of a charitable organization which, wouldn’t you know it, members of that charity are eligible to be credit union members.
Is The Reverse Tier Savings Account Worth It?
You’ll be hard pressed to find many places paying 10% interest on any amount of money. Also, while it says the rates can change at any time, the 10% rate is not an introductory, or temporary rate. The Red Rocks credit union has online banking and you can transfer money back and forth electronically, and if you’re in Colorado, it’s a full brick and mortar bank. If you’re willing to put in the effort it can’t hurt. Even the 4.5% 4-month CD is a pretty decent deal. This is definitely a good on to consider adding to your money management portfolio.