Abstract:
A method for adjusting a demand deposit account. The method may comprise the step of structuring the demand deposit account with at least a first balance tier and a second balance tier. The methods may also comprise the steps of monitoring a balance of the demand deposit account, and accruing interest to at least a portion of the balance of the demand deposit account at an interest rate if the balance falls within the second balance tier. The interest rate may be tied to an interest rate of an investment account.

Description:
CROSS-REFERENCE TO RELATED APPLICATION 
     This application is a continuation of U.S. application Ser. No. 11/647,034, filed on Dec. 28, 2006, now U.S. Pat. No. 7,729,987 which is a continuation of U.S. application Ser. No. 11/415,812 filed on May 2, 2006, now abandoned which claims the benefit of U.S. Provisional Application No. 60/676,831 filed on May 2, 2005, all of which are incorporated herein by reference in their entirety. 
    
    
     BACKGROUND 
     Depositors who need ready access to deposited funds often utilize demand deposit accounts (DDA&#39;s) such as checking accounts. Although DDA&#39;s allow relatively unfettered access to funds, they also have significant shortcomings. The return on funds kept in DDA&#39;s is often limited because many DDA&#39;s pay little or no interest on account balances. Also, financial institutions are limited in the way that they can use funds deposited in DDA&#39;s because of the associated liquidity risk: a depositor may have the right to remove any or all of the deposited funds at any time to pay for a transaction, or for any other reason. Moreover, the low interest rate paid on a typical DDA does not create a significant incentive for the depositor to keep funds in the DDA. From the standpoint of the financial institution, this makes the balances of DDA&#39;s highly liquid. Therefore, financial institutions are often prevented from using DDA deposited funds in longer term investments, and thereby lose the opportunity to pursue the potential return that such investments might provide. 
     The problems associated with DDA&#39;s often force depositors who want to earn a higher interest rate to transfer funds from a DDA to a higher interest-bearing account when the funds are not needed in the DDA to cover transactions. This approach, however, only creates additional difficulties. It can be appreciated that a considerable degree of cash flow management is required on the part of the depositor to calculate what portion of an account balance may be transferred at any given time and to move that balance between accounts. In addition, mistakenly calculating the required balance in the DDA, or not transferring sufficient funds from the higher interest-bearing account back into the DDA, may cause costly overdrafts on the DDA. 
     Many banks automate fund transfers by offering sweep accounts, however, these accounts also present their own problems. Typically, a sweep account includes two physical accounts, a DDA and an associated investment account (e.g., a money market account). After all daily transactions have cleared the DDA, some portion of its remaining balance is transferred to the investment account where the funds may earn interest until the opening of the next business day. At that time, the funds are transferred back to the DDA. It will be appreciated that it requires substantial administrative resources and information technology infrastructure to maintain two accounts and transfer balances, as in a sweep account. Also, with many existing sweep accounts, one or both of the DDA and the investment account are not insured by the Federal Deposit Insurance Corporation (FDIC) or another insurance provider, thereby increasing the depositor&#39;s financial risk. 
     Accordingly, in view of the problems described above, there is a need for a DDA that can be structured to potentially increase depositor returns while reducing the liquidity risks for financial institutions that offer the DDA. 
    
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
       Further advantages of the present invention may be better understood by referring to the following description taken in conjunction with the accompanying drawings, in which: 
         FIG. 1  is a diagram illustrating a process flow according to various embodiments of the present invention; 
         FIG. 2  is a diagram illustrating a system according to various embodiments of the present invention; and 
         FIG. 3  is a diagram illustrating a structure of a demand deposit account (DDA) according to various embodiments of the present invention. 
     
    
    
     DESCRIPTION 
     As applied herein to embodiments of the invention, the term “financial institution” may refer to any entity or institution that offers a demand deposit account (DDA). Examples of financial institutions may include banks, credit unions, savings and loan companies, or any other entity capable of offering, maintaining or managing a DDA. 
     Also, as applied herein, the term “depositor” may refer to any entity accessing, using, or holding a DDA with a financial institution. Depositors may include, for example, individuals, groups of individuals, business entities, or other entities. 
     Referring now to  FIGS. 1 and 2 , example embodiments of the present invention are provided. At step  102  of process flow  100  shown in  FIG. 1 , a depositor  208  may open a DDA  210  with a financial institution  202 . The DDA  210  may be offered to depositor  208 , under various conventional terms agreed upon by the depositor  208  and the financial institution  202 . In various embodiments of the invention, the depositor  208  may be required to pay a periodic fee to financial institution  202 , such as a monthly fee, for providing and maintaining the DDA  210 . Also, in various embodiments, the depositor  208  may be required to maintain a minimum balance in the DDA  210 . For example, the depositor  208  may be required to pay a monthly fee if the balance of the DDA  210  drops below the minimum balance. In various embodiments of the invention, the DDA  210  may be covered by the FDIC or another suitable insurance provider. 
     At step  104 , the DDA  210  may be structured to include two or more balance tiers.  FIG. 3  shows a DDA  210  structured to include an exemplary set of balance tiers  302 ,  304 ,  306 ,  308 ,  310  according to various embodiments of the invention. The transition point between two balance tiers may be referred to as a threshold amount. For example, the threshold amount between balance tier  302  and balance tier  304  is $2,000. It will be appreciated that the DDA  210  may be divided into two or more balance tiers as desired, with the threshold amounts between balance tiers set at any suitable value or values based on factors including, for example, the net worth of the depositor  208 , the financial objectives of the financial institution  202  and/or other factors. For example, the threshold amount between a first and a second balance tier may be $25,000. 
     Each balance tier  302 ,  304 ,  306 ,  308 ,  310  may correspond to an interest rate paid on the DDA  210 . In various embodiments of the invention, higher balance tiers may correspond to higher interest rates. For example, balance tier  302  may correspond to a first interest rate and balance tier  304  may correspond to a second interest rate slightly higher than the first and so forth. In various embodiments of the invention, the interest rate corresponding to a first balance tier, for example, balance tier  302 , may be 0%, meaning that the depositor  208  may be required to deposit a balance in the DDA  210  greater than the threshold between balance tier  302  and balance tier  304  to earn any interest. 
     The interest rates corresponding to various balance tiers may be any interest rates agreed upon between the financial institution  202  and the depositor  208 , and may be static or dynamic rates. In various embodiments of the invention, the interest rates corresponding to one or more balance tiers may be tied to an interest rate paid on another financial product. For example, the interest rates corresponding to balance tiers may be equal to those of the financial product, or equal to those of the financial product plus or minus a predetermined number of basis points. For example, the interest rate corresponding to a balance tier may be tied to a rate paid on: a savings account, a money market account, a certificate of deposit, and/or other financial product. Different balance tiers may have corresponding interest rates tied to different financial products. For example, balance tier  304  may have an interest rate tied to a savings account while balance tier  306  may have an interest rate tied to a money market account. 
     At step  106 , the financial institution  202  may monitor the balance of the DDA  210  to the proper balance tier for the DDA  210 . It will be appreciated that the balance of the DDA  210  may fluctuate over time. Monitoring the balance of the DDA  210  may include checking the DDA  210  balance at pre-determined intervals, for example, every minute, every hour, every 12 hours, every day, or on a non-periodic basis. In various embodiments of the invention, the DDA  210  balance may be modified for the purpose of determining its balance tier based on other factors. The DDA  210  balance may be supplemented based on other financial products held by the depositor  208  with the financial institution  202 . For example, the depositor  208  may hold a savings account, a certificate of deposit, or other financial product or products with the financial institution  202 . A supplementary amount based on the balances of these other financial products may be aggregated together with the balance of the DDA  210  to determine which balance tier should apply to the DDA  210  balance. In certain embodiments, the supplementary amount may include all or only a portion of the depositor&#39;s  208  balances of other financial products (e.g., 50% of the depositor&#39;s  208  certificate of deposit balance). 
     The balance of the DDA  210  may be monitored by a computer system  202 A associated with the financial institution  202 , for example, that uses or accesses an interest module  202 B. The interest module  202 B may be implemented as software code, for example to be executed by a processor(s) of the computer system  202 A using any type of suitable computer instruction type, such as, for example, Java, C, C++, Visual Basic, etc., using, for example, conventional or object-oriented techniques. The software code may be stored as a series of instructions or commands on a computer readable medium, such as a random access memory (RAM); a read only memory (ROM); a magnetic medium, such as a hard drive or floppy disk; an optical medium such as a CD or DVD-ROM or a flash memory card. 
     At step  108 , the financial institution  202  may determine whether the total balance of the DDA  210  has transitioned or changed into a different balance tier (e.g., utilizing the computer system  202 A and the interest module  202 B). For example, with reference to  FIG. 3 , if the depositor  208  makes a deposit bringing the balance of the DDA  210  above $1,999.99, then the DDA  210  may transition from balance tier  302  to balance tier  304 . If the DDA  210  has not transitioned into a different balance tier, then the financial institution  202  may continue to monitor the DDA  210  balance as described above at step  106 . 
     If the DDA  210  has transitioned into a different balance tier, then the financial institution  202  (e.g., utilizing the computer system  202 A and interest module  202 B), may adjust the interest rate paid on the DDA&#39;s  210  balance to reflect the new balance tier. In various embodiments of the invention, the interest rate associated with a balance tier may be paid on the entire balance of the DDA  210 . For example, with reference to  FIG. 3 , if the balance of the DDA  210  is between $2,000 and $9,999.99, then the interest rate corresponding to balance tier  304  may be applied to the total balance of the DDA  210 . In certain embodiments, the interest rate associated with a balance tier may be paid on the portion of the DDA  210  balance falling within the balance tier. For example, again with reference to  FIG. 3 , if the balance of the DDA  210  is in the range of $2,000 to $9,999.99, then the interest rate corresponding to balance tier  304  may be applied only to the portion of the DDA  210  balance above $2,000. Interest may be paid on the remainder of the DDA  210  balance (e.g., the first $2,000 of the DDA  210  balance) at the rate corresponding to balance tier  302 . 
     The depositor  208  may access the financial institution  202  to manipulate the DDA  210  according to a number of methods or systems. For example, the depositor  208  may wish to make a deposit to the DDA  210 , make a withdrawal from the DDA  210 , make a purchase by drawing on the DDA  210 , or perform other transactions. The depositor  208  may access, view or manipulate the data associated with the DDA  210  by accessing the computer system  202 A of the financial institution  202 , for example. In certain embodiments, the depositor  208  may access the computer system  202 A by traveling in person to a branch office, for example, of the financial institution  202 . 
     In other non-limiting embodiments, the depositor  208  may access the computer system  202 A of the financial institution  202  by a variety of user interfaces  206  including, for example and without limitation, a computer system  206 A, a personal data assistant (PDA) or handheld computer  206 B, a notebook  206 C, or a wireless or wireline variety of telephone  206 D. It can be appreciated that any user interface  206  capable of communicating data between the depositor  208  and the financial institution  202  and/or the computer system  202 B may be employed within the scope of the invention. In addition, data may be communicated from the user interface  206  to the financial institution  202  through an appropriate communication medium or media  204  such as, without limitation, a wireless data network  204 A, a wireline server  204 B, and/or through a networked media or medium  204 C, such as by an Internet or intranet connection. 
     It will be appreciated that embodiments of the present invention may offer potential benefits to both the depositor  208  and the financial institution  202 . For example, the depositor  208  may earn an interest rate on funds deposited in the DDA  210  at an interest rate corresponding to a money market account or other investment account. The financial institution  202  may enjoy the increased stability of less liquid DDA  210  fund balances. For example, the interest paid to the depositor  208  may create an incentive for the depositor  208  to keep funds in the DDA  210 , thus making the funds less liquid from the standpoint of the financial institution. The depositor  208  and financial institution  202  may enjoy these and other benefits without the information technology and other expenses involved with administering a sweep account as described above. One skilled in the art will appreciate these and other advantages of the present invention. 
     It is to be understood that the figures and descriptions of the present invention have been simplified to illustrate elements that are relevant for a clear understanding of the present invention, while eliminating, for purposes of clarity, other elements, such as, for example, details of DDA administration. Those of ordinary skill in the art will recognize that these and other elements may be desirable. However, because such elements are well known in the art, and because they do not facilitate a better understanding of the present invention, a discussion of such elements is not provided herein. 
     As used herein, a “computer” or “computer system” may be, for example and without limitation, either alone or in combination, a personal computer (PC), server-based computer, main frame, server, microcomputer, minicomputer, laptop, personal data assistant (PDA), cellular phone, pager, processor, including wireless and/or wireline varieties thereof, and/or any other computerized device capable of configuration for processing data for standalone application and/or over a networked medium or media. Computers and computer systems disclosed herein may include operatively associated memory for storing certain software applications used in obtaining, processing, storing and/or communicating data. It can be appreciated that such memory can be internal, external, remote or local with respect to its operatively associated computer or computer system. Memory may also include any means for storing software or other instructions including, for example and without limitation, a hard disk, an optical disk, floppy disk, ROM (read only memory), RAM (random access memory), PROM (programmable ROM), EEPROM (extended erasable PROM), and/or other like computer-readable media. 
     The term “computer-readable medium” as used herein may include, for example, magnetic and optical memory devices such as diskettes, compact discs of both read-only and writeable varieties, optical disk drives, and hard disk drives. A computer-readable medium may also include memory storage that can be physical, virtual, permanent, temporary, semi-permanent and/or semi-temporary. A computer-readable medium may further include one or more data signals transmitted on one or more carrier waves. 
     While several embodiments of the invention have been described, it should be apparent that various modifications, alterations and adaptations to those embodiments may occur to persons skilled in the art with the attainment of some or all of the advantages of the present invention. It is therefore intended to cover all such modifications, alterations and adaptations without departing from the scope and spirit of the present invention as defined by the appended claims.