Account opening calculator: the four-part math behind the number

This page computes nothing. There is no form, no field and no button. Any page that offers to tell you what opening a business account will cost is guessing at three numbers only you have: what your time is worth, what your institution's schedule charges, and what your account does in a month.

What a page can do is give you the arithmetic, so you can run it in a spreadsheet in about twenty minutes and get an answer that is yours rather than an average.

What to take away

The four parts of the number

Setup labor. The hours the opening consumes, priced at what those hours cost you. Count the assembly of documents, the application itself, every follow-up exchange, and the testing afterwards. Two people, usually.

Direct outlays. Certified copies, notarization, courier, and the cost of running the old account in parallel while the new one proves itself.

Stranded balance. If avoiding a monthly charge requires holding a floor, that floor is capital you cannot spend. Value it at whatever a dollar is worth inside your business, not at a deposit rate.

Annual running cost. Your own activity for a year, priced through the institution's fee schedule item by item.

Add the first three plus one year of the fourth for year one. Year two onward is stranded balance plus running cost, and that is the number to compare accounts on, because setup is paid once and the rest is paid forever.

Worked example: an invented business

Everything in this section is a placeholder chosen to make the method visible. Do not read any of it as a rate or a charge. Substitute your own numbers in the same slots.

Suppose an invented business, a small workshop that takes some currency and sends a handful of wires a month, and suppose its own costed hourly rates are 62.00 for the owner and 34.00 for the bookkeeper.

Setup labor: 6 owner hours at 62.00 gives 372.00, plus 9 bookkeeper hours at 34.00 gives 306.00. Labor is 678.00.

Direct outlays: 40.00 for filed copies, 25.00 for notarization, 18.00 for courier. That is 83.00. Running the old account two extra months at an invented 22.00 a month adds 44.00.

The stranded balance line

Suppose the waiver on this invented account requires a 7,500.00 floor, and suppose money inside this business is worth 9 percent a year, because that is what it costs to borrow or what the next project returns.

7,500.00 at 9 percent is 675.00 a year, or 56.25 a month.

That number is why a "free" account is often the expensive one. It appears on no statement, and for a business short of working capital it is frequently larger than every printed charge combined.

Use your real cost of capital, not a deposit rate, since the question is what else that money would have done. The reasoning behind treating a held balance as a cost sits under business savings.

The running cost line

Take twelve months of your own activity and price it through the schedule. For the invented business:

That totals 900.40 for the year.

Year one for this invented business is 805.00 plus 675.00 plus 900.40, which is 2,380.40. Year two onward is 675.00 plus 900.40, which is 1,575.40.

The method for pulling your own volumes out of twelve months of statements is on the banking fees page, and that step is worth doing carefully, because the volumes are what make the answer yours.

Comparing two accounts honestly

Now price a second, invented alternative through the same four slots: no monthly charge, a smaller free allowance so 400 chargeable items at 0.55, cheaper wires at 19.00, more expensive currency handling at 0.0035 per unit, and no balance floor.

Items 220.00, wires 266.00, currency 336.00. Running cost 822.00, stranded balance zero, so year two onward is 822.00 against 1,575.40. On these invented numbers the account with the visible monthly charge is 753.40 a year worse, and almost all of the gap is the balance nobody was billing for.

Reverse one assumption and the answer reverses with it. Drop the currency volume to near zero and the second account wins by more. Raise the cost of capital and it wins by more again. Give the business plenty of spare cash and the floor stops mattering, and the first account wins.

This is why a ranking cannot be written for you: the ordering is a property of your activity, not of the accounts. What can be judged from outside is the shape of a schedule, which is covered under how to judge a fee structure.

Where the numbers come from

For deposits, remember separately that protection exists at insured institutions with limits and conditions that depend on titling, and that the position is published by the FDIC and, for insured credit unions, by the NCUA. That is a structural question rather than a cost line, and it does not belong in this arithmetic.

Common questions

Why will this page not just calculate it for me?

Because it would have to invent your hourly cost, your item volumes, your currency handling and your cost of capital, and the answer would be entirely determined by those inventions. A number produced that way looks authoritative and means nothing.

Should setup cost affect which account I choose?

Rarely. It is paid once and it is similar across institutions. Let it decide only between options that are otherwise level, or when a migration is large enough that the disruption itself is the cost. The sequencing that keeps setup low is under the opening sequence.

What if I cannot get a fee schedule before applying?

Ask again, in writing. An institution that will not put its schedule in front of a prospective business customer has told you something useful about how the rest of the relationship will go.

Does this arithmetic work for a second relationship?

Yes, and it is the right way to price one. Run it with your real fallback volumes, which are usually near zero, and compare the result against what one blocked day would cost you. The case for keeping that relationship live is under business checking.