[lfink]

Hello!

I have a question. We are looking at changing up our savings program for our youth. Could we offer a savings account for our youth that has a tiered rate for different balances that would only be paid if certain conditions are met? For example, could we have an interest rate of 1% for balances between $0 and $2,499, then 2% for balances between $2,500 and $4,999, and then 3% for balances $5,000 above if the customer meets these criteria:

• Must between 0-17 years of age
• 1 account per social security number
• Have a minimum automatic deposit of $20 into the account
• Estatements would be required
• Account would be set up as a transfer in only (so must come into bank to withdraw)

If the customer did not meet these requirements, then the interest rate would be a different number like 0.1% for the month. Each month the customer would have the opportunity to qualify for the bonus interest. After the youth turns 18, the account would automatically transfer to a regular savings account and would earn the interest for a regular savings account and would not be subject to the other qualifications for this youth account.

Thank you for your help!

[donblaine]

I see nothing wrong with your proposed youth savings account where rates are tiered based on account balances and other criteria.

Most banks with such a program reclassify the minor account as a regular savings account when the youth reaches the age of 18.

I’m not completely sure what you mean by “minimum automatic deposit of $20 into the account” but assume you are envisioning an EFT from a parents or other adults account at account inception. This would need to be clearly spelled out.

Be careful about saying that e-statements are required as ESIGN allows anyone receiving an e-statement to revoke that option at any time. However, your plan is sound as you are offering the same product to those that do not, or can not, receive e-statements, albeit at a lower APY. A better way to spin this might be to say “sign up for online statements to receive our highest rates and earn greater interest” rather than making it appear that online statements are required and that those that don’t have internet access are being penalized.

You would also need to deal with the Joint Tenancy vs UTMA ownership issue.

It’s usually easier to CIP a minor as you can use a student ID card, get a teacher’s confirmation, birth certificate, immunization card, social security card, etc but make sure your method of satisfying CIP requirements is clearly spelled out in your bank’s BSA Policy before you offer this product and also make sure that any training or written procedures also support what is added to your CIP policy for these accounts.

Other possible issues deal with whether you allow ATM or debit card access and whether this account has an overdraft component. Also be cognizant of pointing out any transfer or withdrawal limitations associated with this type of account that might differ from other savings accounts.

Make sure you disclose what will happen when the minor turns 18 such as “Minor Savings Accounts convert to a regular savings account and applicable fees will apply when the minor turns 18”.

Finally, if you are limiting this account to students who are U.S. citizens or permanent residents or those with a Social Security Card say so.

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