As banks lower minimums for market-rate interest, extra care will be needed

The universe of people who can get higher, market-rate yields on federally insured savings is about to be expanded somewhat. But the level of confusion about those accounts may increase, too.

Starting Jan. 1, the legal minimum deposits on money market deposit and Super NOW accounts offered by banks and savings-and-loans will drop from $2,500 to $1, 000. This is part of the bank-rate deregulation plan begun two years ago that has given savers - at least those with $2,500 or more - a place to put their money where they can earn rates comparable to money market mutual funds and have the security of federal deposit insurance.

Banks, however, won't be required to pay the top rate on deposits under $2, 500, notes Robert K. Heady, publisher of 100 Highest Yields, a Miami Beach newsletter. (Mr. Heady also publishes Bank Rate Monitor, and both keep track of the rates and other trends on bank savings accounts.)

Competitive pressures may encourage most banks to go down to the $1,000 limit. On the other hand, earnings pressure - where they have to pay out more for deposits than they are taking in from loans - may encourage some banks to keep the minimums on these accounts at $2,500. If too many depositors shift passbook savings accounts, which are earning 51/2 percent, into the money market deposit accounts (MMDA) or Super NOW accounts, the banks may have to pay out four or five percentage points more for the same deposits. In an industry where a percentage point is measured as 100 ''basis points,'' 400 or 500 basis points is more than many bankers want to contemplate.

One thing you might find after Jan. 1, then, is an institution that does not pay market rates on balances below

$2,500 but pays more than a bank down the street on balances above that amount.

Some banks or savings-and-loans may also offer ''tiered'' rates, Mr. Heady says. Here, an institution could pay 10 percent on all deposits if at least $2, 500 were kept in the account, but only 8 percent when the balance went below that, down to $1,000.

A more complicated version of this, he says, is a ''blended'' rate, where 51/ 2 percent is paid on balances below $1,000, 8 percent on the portion between $1, 000 and $2,500, and 10 percent on the portion above $2,500. The preference would be for a bank or S&L that pays the top rate on the entire balance, as long as a minimum amount - whether $1,000 or $2,500 - is kept in the account. While $5,000 in a tiered account would earn $525.78 in a year, he notes, a blended account would pay $447.71, or $78.07 less.

The simplest way to compare financial institutions is to decide how much you want to put into one of these accounts, call a bank officer who deals with them frequently, and ask how much your money would earn in a year, at the rates that will now be offered.

While you have that bank officer on the phone, spend some time asking about fees and charges. If banks and S&Ls can't make enough on your deposits, they may try to tack on a variety of charges to cover costs. The most common fee is a charge for checks. (By law, you can only write three checks a month on a higher-yielding MMDA, while there is no limit on checks with a Super NOW account.) If there is a per-check charge, see if it can be eliminated by keeping a minimum balance. At some banks and S&Ls, this balance may not even have to be in the MMDA or Super NOW; a separate individual retirement account or certificate of deposit may be applied toward the minimum.

The most visible sign of the lower minimums will probably be a slew of newspaper ads touting the high-rate, lower-deposit accounts. These ads will undoubtedly feature big numbers - big as in inches. Behind those numbers, though , is a little more confusion that you can clear up.

If the ad doesn't tell you somewhere, ask the banker how often the advertised yields are compounded. The shorter the compounding period, the more interest you'll earn. If you can get daily or continuous compounding (producing almost the same result), that's better than weekly, monthly, quarterly, semiannual, or annual compounding. Saving for grandchildren

Can you tell me how I would go about opening a Uniform Gift to Minors Act account or custodial account for at least two grandchildren in different cities and states?- G. R.

Opening a Uniform Gifts to Minors Act (UGMA) account is not difficult, though some states have slightly different regulations governing them, so you or your attorney should check with an expert in each state before doing the paper work. Basically, all you have to do is obtain a social security number for each of the children who are to have the account, if they don't already have such a number. Then just fill out the proper forms, which should be available from most banks and brokerages. Tax forms will also have to be filled out for each child every year.

The major advantage of a UGMA will be easily seen as these tax forms are prepared. Because the income on the account is taxed at the child's rate, there will probably be no tax on it at all, at least in the early years, and very little tax after that. The most important difference between states is the age when control of the account goes to the child. In some states control shifts at age 21; in others, it's 18. If the child is in one of these latter states, you may not want him to have control of the account that early.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given by mail or phone. References to investments are not an endorsement or recommendation by this newspaper.