Account analysis allows a business to offset fees and service charges by maintaining compensating balances. Instead of an account being "hard charged" and debited for services throughout the month, a running total, called "soft charges" is kept. At the end of the month, the customer receives an earnings credit on the average available balance in the account.
- If the amount of the earnings credit is greater than the soft charge total, no fees are deducted that month.
- If the amount of the earnings credit is less than the soft charge total, the remaining fees will be deducted from the account balance.
To maximize earnings credit, grouping multiple checking accounts together for analysis, allows high balances in one account to compensate for high volume in another account.
In plain English, keeping compensating balances in an account offsets service charges.
Here's how Account Analysis works:
Our Account Analysis Statement enables the customer to review account balances and charges in detail with a concise, logical statement, providing all of the information in an easy-to-understand format. Monthly a separate Account Analysis Statement is mailed to the customer, which will provide the following information.
BASIC ACCOUNT INFORMATION:
The company's name, address, statement date, account number, and group number if applicable.
Provides the activity description, the number of units, the total cost, and the required available balance to support each type of activity.
Average Ledger Balance:
The average ledger balance is the sum of the daily balances in the account divided by the number of days in the month.
Funds which cannot be used by the customer or the bank, is calculated from the average daily balance of funds in the collection process. It is then subtracted from the average ledger balance to arrive at the Average
EARNINGS CREDIT SUMMARY:
Reserve Requirements: (currently not being charged)
A percentage (determined by Federal Regulation) that FNB is required to have available for immediate use. (We cannot invest this percentage).
The amount of excess available balances available to invest.
An Earning Credit Rate, based on the Fed Discount Rate is applied to the Average Available Balance to calculate the earnings value of investable balance on an account. (What FNB would have earned on this balance).
The Net Activity Charges are then compared to the Earnings Value of the Average Available Balance described above. If the amount of the earnings credit is greater than the soft charge total, no fees are deducted that month. If the amount of the earnings credit is less than the soft charge total, the remaining fees will be deducted from the account balance.
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