What Is Kyc And Account Tier In Banking And How Does That Affect Your Money - Blog | Fairmoney (2024)

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What Is Kyc And Account Tier In Banking And How Does That Affect Your Money - Blog | Fairmoney? ›

Anyway, the meaning of KYC is Know Your Customer. Know Your Customer is a banking process of validating customers' information. Now why is it important for the bank to perform KYC? Firstly, it allows the bank to allocate customers to different account tiers or levels.

As a tier 3 customer, your account can receive and hold any amount. Your daily transaction limit is N4,000,000. However, the highest amount you can send per transaction is N1,000,000. For example, if you need to send 4 million Naira, you have to send N1,000,000 four times.

Tier 1 and Tier 2 NPS accounts differ significantly. Tier 1 is the primary NPS account for retirement savings, while Tier 2 offers flexible savings and withdrawal options, functioning more like a voluntary savings account.

Definition of KYC

Know Your Customer is the process of verifying the identity of customer. The objective of KYC guidelines is to prevent banks from being used, by criminal elements for money laundering activities.

A tiered-rate account is a bank account with different interest rates assigned to different balance ranges. Typically, you find tiered rates on savings accounts, but they are also a feature of some money market accounts, certificate of deposit (CD) accounts and interest-bearing checking accounts.

• Tier 1 – Partners that you directly conduct business with. • Tier 2 – Where your Tier 1 suppliers get their materials. • Tier 3 – One step further removed from a final product and typically work in raw materials.

Tier 2 NPS account is an open-access account with all the investment benefits except tax-saving and lock-in hurdles as Tier 1 account.

Below are few significant benefits of Tier II NPS Account: No additional annual maintenance Charge. Saving for your day to day need (withdrawal at any point of time) Transfer fund to pension account ( Tier I) any time.

Tier 1 accounts allow you daily transactions of N50,000 (yes, inflow and outflow) and the account can hold a total of N300,000. Tier 2 accounts allow you daily transactions of N200,000 (that's both inflow and outflow) and the account can hold a total of N500,000. A Tier 3 account is the best place to be 😉.

Having these types of liquid assets or cash balances out the risk-weighted assets that banks hold and increases the stability of the financial system. Tier 2 capital is the supplementary capital held in reserve by a bank.

Is KYC mandatory for a bank account? ›

KYC or 'know your customer' is a mandatory verification procedure carried out by financial institutions with the goal of minimising illegal activities. Since 2004, the Reserve Bank of India has prohibited individuals to open a bank account, trading account or demat account without fulfilling the KYC procedure for KYC.

The 3 main KYC process steps are client or customer identification, customer due diligence (including enhanced due diligence), and ongoing monitoring.

KYC helps banks to comply with Anti-Money Laundering regulations and prevent fraud. The aim of KYC is to protect both the bank and the wider financial markets from illegal activity. This includes involvement in fraud, money laundering, corruption or bribery.

Bank tiers are a way of categorizing banks based on their relative size to the overall banking market (in terms of total banking assets, as provided by the bank's balance sheet).

Tiered-rate accounts work by offering different, or "tiered," rates of interest for different levels of account savings, escalating the rates with the balance. For instance, a bank might offer five fixed-interest-rate tiers on its money-market account, all linked to how much you deposit init.

In its simplest form, a tiered pay structure preserves existing wage progressions for current employees but adopts a different, and generally less robust, structure for new employees. The result is that an employee's wage progression is dependent on their tenure with the company.

A Tier 3 account is a retail industry term for a target account or an account a business would like to create for an ideal customer.

An account that contains more than $250,000 at one bank, or multiple accounts with the same owner or owners, is insured only up to $250,000. The protection does not come from taxes or congressional funding. Instead, banks pay into the insurance system, and the insurance provides their customers with protection.

There isn't a specific maximum amount you can keep in a savings account, but you should be aware of the deposit limits and ensure that your account activities align with income tax regulations.

There is no maximum limit, but your checking account balance is only FDIC insured up to $250,000. However, as we'll cover shortly, it makes sense to put extra cash somewhere it will earn interest.