A relationship APY is a higher annual percentage yield a bank may offer when you meet conditions such as maintaining another account, receiving direct deposits, keeping a minimum balance or holding multiple products with the same bank. The exact meaning depends on the financial institution.
The examples below use APYs of 3.00% and 3.50%. Check the bank's current account terms as of **** because relationship requirements and rates can change.
Relationship APY at a Glance
| Term | Meaning |
|---|---|
| APY | Annual Percentage Yield. It measures how much interest a deposit account can earn in one year, including the effect of compounding. |
| Relationship APY | A higher APY that may be available when you meet a bank's relationship requirements. |
| Relationship requirement | A condition such as opening a checking account, receiving direct deposit or maintaining a minimum balance. |
| Main risk | The higher APY may disappear if you stop meeting the requirements, and account fees may reduce your earnings. |
How Does a Relationship APY Work?
A bank uses a relationship APY to reward customers who keep more of their banking activity with that institution. To qualify, you may need to:
- Open a checking account at the same bank
- Receive a qualifying direct deposit
- Maintain a required balance
- Use a linked debit or credit product
- Keep a certain amount in combined deposits
- Maintain an active banking relationship
The requirements are not standardized. One bank may require a $1,000 electronic deposit during each statement cycle. Another may require a linked checking account and a minimum savings balance.
What Is the Difference Between a Regular APY and a Relationship APY?
A regular APY is the standard yield available on an account. A relationship APY is a higher yield available only when you meet extra conditions.
For example:
| Account status | APY |
|---|---|
| Standard savings customer | 3.00% |
| Customer meeting relationship requirements | 3.50% |
If you keep $10,000 in the account for a full year, the 0.50 percentage-point difference could mean about $50 more in interest, before compounding, taxes and fees.
That higher rate may not be the better deal if the linked account has monthly fees, requires a large balance or comes with conditions that are difficult to maintain.
Why Do Banks Offer Relationship APYs?
Relationship APYs give customers an incentive to keep checking, savings and other financial activity with one bank. In return, the bank may offer a higher deposit rate or waive certain fees.
Other possible benefits include:
- Reduced account fees
- Preferred customer service
- Higher interest-rate tiers
- Special CD rates
- Easier transfers between accounts
Some banks use "relationship" as the name of an account. Others use it to describe a bonus rate. Broadway Bank, for example, describes its Relationship Savings account as requiring a checking account and a minimum balance to receive its advertised higher APY.
Is a Relationship APY Worth It?
A relationship APY is worth considering when the extra interest is greater than the cost and inconvenience of meeting the requirements.
Before opening an account, compare these details:
The standard APY and relationship APY Look at the actual difference between the two rates, not only the higher advertised rate.
Monthly account fees A maintenance fee can eliminate the extra interest.
Minimum balance requirements Find out whether your balance must stay above the threshold every day or only at the end of a statement cycle.
Direct deposit requirements Confirm the required amount, deposit type and frequency.
Balance limits Some relationship rates apply only to a specified balance. Any amount above that limit may earn a lower rate.
Rate changes Savings and checking APYs are often variable, so the bank may change them under the account terms.
What happens if you no longer qualify The bank may move you to the standard APY or remove another account benefit.
Fees can reduce the earnings from a deposit account. Broadway Bank's disclosures address this limitation with its advertised APYs.
Relationship APY Versus APY: Which One Should You Choose?
Choose the relationship APY when:
- You already use the bank for checking or direct deposit
- The qualifying account adds little or no cost
- You can comfortably maintain the required balance
- The rate remains competitive with other savings accounts
- You understand when the bank can remove the higher rate
A standard high-yield savings account may be a better choice when the relationship APY requires an expensive account, a large balance or products you do not need.
Bottom Line
The bank's rate sheet controls what "relationship APY" means. Before opening a linked account, check the qualifying balance, direct deposit rule, monthly fee, balance limit, rate-change terms and APY you receive if you no longer qualify.