Question

Bill wants to open a checking account to pay bills from and a savings account to cover overdrafts and other emergencies. He wants online services, and a debit card. He analyzes the following statements of fees from State Bank and Common Bank:

Based upon past experience, Bill expects to accidentally overdraft the account 2 times per year, unfortunately, due to unexpected charges and miscommunications. He expects no 2nd copies of statements, and to use network ATMs 4 times per month with State Bank (due to less in-network ATMs being available), or 2 times per month with Common Bank. He has $2500 to deposit to an emergency savings account for overdraft protection, and thinks that the balance will be enough to cover most all overdrafts in the future if automatic transfers are made when needed. Based on the tables of fees, which bank is expected to cost the least amount in fees per year?
a.
State Bank is expected to cost the least.
b.
Common Bank is expected to cost the least.
c.
State Bank and Common Bank would have the same costs for Bill.
d.
The fees cannot be estimated in advance.

Answer 1

I don’t have the two banks’ fee tables you referenced, so I can’t compute a numeric answer yet. Please either paste the fee statements for State Bank and Common Bank, or tell me the relevant fees below.

What I need (for each bank)
- monthly maintenance fee (and whether it can be waived; if so, the waiver condition and whether Bill meets it with his balances)
- ATM fees: in-network free? out-of-network surcharge (per withdrawal), and whether other banks’ ATM owners add another surcharge
- overdraft fee (per paid overdraft) and any fee for returned items
- overdraft-protection transfer fee (if savings will be used to cover overdrafts, is each automatic transfer free or charged?)
- savings account monthly fee or minimum-balance fee (and minimum required)
- online/bill-pay fees (if any)
- paper-statement or statement-copy fee (you said he expects no 2nd copies, but note if there’s a base paper-statement fee)
- debit card fee (if any)
- any other per-use fees (e.g., ACH, ATM balance inquiry)
- any sign-up or annual fees

Extra assumptions to confirm
- He links the $2,500 savings for automatic overdraft transfers (so those transfers will be used to avoid overdraft fees if possible).
- Overdraft protection transfers occur only when needed; you expect 2 overdrafts per year.
- ATM use: State Bank 4/month out-of-network, Common Bank 2/month out-of-network (you gave these).
- No extra paper-statement copies needed.

How I’ll compute the expected annual cost
Annual cost = 12*(monthly maintenance fee, after waivers) + 12*(ATM out-of-network surcharge * uses per month) + (# overdrafts per year * overdraft fee if not avoided) + (# overdrafts * overdraft-protection transfer fee if charged) + any savings-account fees (monthly or below-minimum) + any other per-use annual charges.

If you paste the two fee tables (or give the numbers requested), I’ll compute the expected annual fees for each bank and tell you which choice (a, b, or c) is correct. If you prefer, I can also show a worked example using plausible sample numbers.