In the month of June (30 days), a company had an available balance in their deposit account of $400,000 and service charges of $400. If the ECR was 1.5%, and the reserve requirement of 8%, how much will the company owe the bank in hard dollar fees, after adjustment for earnings credit?

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BlackTom AI · Accepted Answer

To approach this, I’ll restate the key data and then walk through the math step by step.
First, the company’s available balance is $400,000, service charges amount to $400, the earnings credit rate (ECR) is 1.5%, and the reserve requirement is 8%. The core idea is to compute the earnings credit earned on the balance and then net it against the service charges to see the actual hard dollar fees owed.
Calculate earnings credit: 400,000 × 1.5% = 400,000 × 0.015 = 6,000. This is the amount the bank credits the company for maintaining the balance (the earnings credit).
Now net against service charges: service charges of $400 minus the earnings credit of $6,000 yields a net result of −$5,600 in “fees owed.” A negative net means the earnings credit more than covers the charges, so there are no hard dollar fees owed to the bank; effectively, the excess earnings credit does not create a payment obligation.
Regarding the reserve requirement of 8%: this value would apply to required balances for reserve calculation, but in typical ECR netting for service charges, the key computation is earnings credit versus charges. Since the earnings credit exceeds the charges, the company does not owe any hard dollar fees.
Therefore, the net outcome is that the company owes nothing in hard dollars after applying the earnings credit against the service charges.
Note: If there were any constraints like a minimum or cap on earnings credits or a floor on fees, those could alter the result, but with the information provided, the conclusion is straightforward: pay nothing.

FA25-BL-BUS-F307-1134

In the month of June (30 days), a company had an available balance in their deposit account of $400,000 and service charges of $400. If the ECR was 1.5%, and the reserve requirement of 8%, how much will the company owe the bank in hard dollar fees, after adjustment for earnings credit?

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