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Part of How to sort banking fees by trigger
How to calculate banking fees without a calculator, using two example schedules
No calculator is provided. It names the five shapes a bank fee line can take, applies two invented schedules to three invented months, and finds break-even points.
No calculator here. Instead, read a fee schedule as small functions, then apply their arithmetic to your own months to see what an account would charge.
Two invented schedules run through three invented months below. Every number is a placeholder for the math, not any real institution.
What to take away
- A fee schedule is five kinds of function. Once you can name each one, applying it to your month is mechanical.
- The waiver has a break-even, and the item allowance has a crossover. Both are one line of arithmetic.
- Apply every schedule to the same months of your own activity, or the comparison means nothing.
The five shapes a charge can take
Every line on a schedule is one of these.
The five shapes of a charge
Shape
- Fixed
- Flat per period
- Conditional fixed
- Waived if condition holds
- Allowance then per-item
- Free items, then each
- Threshold then per-unit
- Free value, then units
- Per-event
- Each occurrence
How it is charged
- Fixed
- The amount
- Conditional fixed
- Amount or zero
- Allowance then per-item
- Over x rate
- Threshold then per-unit
- Units x rate
- Per-event
- Count x charge
Cost formula
- Fixed
- Conditional fixed
- Allowance then per-item
- Threshold then per-unit
- Per-event
- Fixed.A flat amount per period regardless of activity. Cost = the amount.
- Conditional fixed.A flat amount that is waived when a condition holds, usually a balance measured a particular way or an activity level. Cost = the amount if the condition fails, zero if it holds.
- Allowance then per-item.A number of items free, then a charge for each item beyond. Cost = max(0, items minus allowance) x charge per item.
- Threshold then per-unit of value.A value free per period, then a charge per unit of value above it, often per hundred or per thousand, often rounded up to the next unit. Cost = ceiling((value minus threshold) / unit) x charge per unit.
- Per-event.A flat charge each time something happens: a wire, a returned item, a stop payment. Cost = count x charge.
Write each line of a real schedule against one of the five. That is the whole preparation.
You need the controlled schedule, not a marketing summary.
What must be disclosed about deposit account terms, and in what form, is published as Regulation DD. Read it once to tell a proper disclosure from a derivative. The rest of the evidence to collect first is listed under what you need in hand.
Two invented schedules
Schedule P (placeholder). A conditional fixed maintenance charge of 18 per month, waived when the lowest daily balance is at least 7,500. An allowance of 150 items, then 0.35 per item. Cash deposits free up to 5,000 per month, then 0.25 per 100 or part thereof. Outgoing domestic wire 22. Returned deposited item 12.
Schedule Q (placeholder). No maintenance charge. Every item 0.20, no allowance. Cash deposits free up to 2,000 per month, then 0.30 per 100 or part thereof. Outgoing domestic wire 30. Returned deposited item 12.
Three invented months
A made-up cafe. Three months chosen to show a waiver holding, a waiver failing, and a boundary case.
| Month | Lowest daily balance | Items | Cash deposited | Wires out | Returned items |
|---|---|---|---|---|---|
| A | 9,100 | 120 | 4,200 | 0 | 0 |
| B | 6,400 | 190 | 8,900 | 1 | 1 |
| C | 7,500 | 151 | 5,050 | 2 | 0 |
Applying schedule P
Month A. Balance 9,100 holds the waiver: maintenance 0. Items 120 are inside the allowance: 0. Cash 4,200 is under the threshold: 0. No wires, no returns. Total 0.
Month B. Balance 6,400 fails the waiver: 18. Items 190 minus 150 = 40 over, x 0.35 = 14. Cash 8,900 minus 5,000 = 3,900 over, which is 39 units of 100, x 0.25 = 9.75. One wire, 22. One returned item, 12. Total 75.75.
Month C. Balance 7,500 is exactly the waiver level; "at least" means it holds: 0. Items 151 minus 150 = 1 over, x 0.35 = 0.35. Cash 5,050 minus 5,000 = 50 over, which rounds up to one unit of 100, x 0.25 = 0.25. Two wires, 44. Total 44.60.
Three-month total on P: 120.35.
Notice month C. The balance sat on the boundary; the waiver's wording, "at least" rather than "more than," decided 18 either way.
The cash line rounded a 50 excess up to a full unit. That made the difference between 0.13 and 0.25: trivial here, not trivial when the unit is larger. Read the schedule for both the comparison word and the rounding rule.
Applying schedule Q
Month A. Items 120 x 0.20 = 24. Cash 4,200 minus 2,000 = 2,200, 22 units, x 0.30 = 6.60. Total 30.60.
Month B. Items 190 x 0.20 = 38. Cash 8,900 minus 2,000 = 6,900, 69 units, x 0.30 = 20.70. One wire, 30. One return, 12. Total 100.70.
Month C. Items 151 x 0.20 = 30.20. Cash 5,050 minus 2,000 = 3,050, 31 units after rounding up, x 0.30 = 9.30. Two wires, 60. Total 99.50.
Three-month total on Q: 230.80.
On these invented months and schedules, P is cheaper every month. The largest single reason is the item allowance: Q charges for every one of the cafe's items, while P charges only for the few beyond 150.
That result belongs to these placeholders only. A business with different months would get a different answer, which is the point of doing it on your own.
The two break-evens worth knowing
The waiver. Schedule P waives 18 a month for a 7,500 floor. Over a year that is 216. Holding 7,500 to save 216 is worthwhile only if that money could not earn more than 216 elsewhere, which on these placeholder figures is 216 / 7,500, or 2.88 percent a year. If a comparable-access account would pay more than that, the waiver costs more than it saves; if less, keeping the floor is the better trade. Substitute your own floor, your own charge, and a current rate from an institution's own published terms. For orientation on what national deposit rate data is and how it is compiled, the regulator publishes its national rates material; it will not price your account, and it is a useful reminder that the balance side and the charge side are set separately.
The two break-evens
- 2.88%annual return needed to justify holding the 7,500 floor
- 216annual maintenance saved by the waiver
- 350 itemscrossover where P and Q item charges tie
- 230 itemscrossover if P's maintenance is not waived
The item crossover. Ignoring every other line, P charges 0.35 x (items minus 150) once items exceed 150, and Q charges 0.20 x items. Set them equal: 0.35n minus 52.5 = 0.20n, so n = 350. Below 350 items P's allowance wins; above, Q's lower per-item charge wins. If P's maintenance is not waived, add 18 to P's side and the crossover falls to 230. A single line of algebra tells you which side of it your months fall on.
Doing it on your own months
- Take at least three of your own months, including your busiest and your lowest-balance month. Twelve is better.
- For each month, pull the same six inputs as the table above, plus any others your schedule charges for.
- Classify every line of each schedule you are comparing as one of the five shapes.
- Apply each line to each month. Keep the lines separate in the result, because the split tells you which line to fix.
- Sum by month and by schedule. Compute the waiver break-even and the item crossover for your own figures.
- Compare totals on identical months. Any line you cannot find on a schedule is a question for the institution, not a zero. The same arithmetic applied to a branchless account, where the lines are named differently but behave the same way, is worked through under where the cost of a branchless account lands.
The taxonomy for finding every chargeable line, including the ones that never appear on the summary page, is on the banking fees page. For a fuller twelve-month method that adds stranded balances and exception costs, see the worksheet under business checking.
Running your own months
- Take three or more months, busiest and lowest balance
- Pull the same six inputs per month
- Classify every schedule line into the five shapes
- Apply each line, keep lines separate
- Sum by month and schedule
- Compare totals on identical months
Do it this week
Pull three months, classify each schedule's lines into the five shapes, and run the arithmetic above on your own figures. It takes an hour, and it replaces every guess about which account is cheaper with a number that is yours.
If the totals come close, break the tie on which schedule you can predict, not the smaller number.
Fix the timing instead to keep failure charges out of the comparison, as set out under cash management.
Common questions
Why not just publish a calculator?
Because a calculator would need the schedules built in, and every real schedule differs and changes. The five shapes and the arithmetic are stable; the numbers are yours to supply.
Which month should I test with?
All of them, but if only one, the one with the lowest daily balance, because that is where a conditional fixed charge fails.
Are the placeholder charges typical?
They are round numbers chosen so the arithmetic is easy to follow. Draw no conclusion about what any institution charges from them.
What if a schedule line fits none of the five shapes?
Tiered charges, where the per-item rate changes at each band, are shape three applied band by band. Anything stranger deserves a written question to the institution before you model it.
