APY Range Calculator

As more financial institutions begin to offer “reward”-type accounts, it’s important to ensure the annual percentage yield (APY) is being accurately disclosed. 

The APY calculation requirements can be found in Appendix A of Regulation DD (Truth in Savings).  Part I addresses the APY for account disclosures and advertising purposes and in this case, we want to look at Part I, Letter D, “Tiered-Rate Accounts (Different Rates Apply to Specified Balance Levels)”.  It provides two options for calculating the APY for a tiered-rate account:

            Option A:

Under this method, an institution pays on the full balance in the account the stated interest rate that corresponds to the applicable deposit tier.

            Option B:

Under this method, an institution pays the stated interest rate only on that portion of the balance within the specified tier.

Under Option A you will only disclose a single APY for each tier (for example, .75% APY).  Under Option B; however, you must disclose an APY range that shows the lowest and highest APY for each tier (other than the first tier).  For example, .75%-.63% APY.

We’ve come up with a calculator to help!  We’d still recommend that if your software can do the calculations, you let it.  If nothing else, this is a good tool to double check the information it kicks out.  All you need to do is enter the compounding frequency, as well as the balance requirements and interest rate for each tier and the tool will do the rest!  Please note: this APY Range Calculator only works if you are compounding interest.

Be sure to check out the calculator in the FREE Deposit Resources on our website and listen to Deb Irving explain how to use it. 

You can also read more about this requirement in the March edition of Banking on BCC.

Find all your Deposit Operations Free Resources here!


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