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Henry is moving and needs to open a new checking account. He is trying to decide between three banks using the chart below:

Bank X
Bank Y
Bank Z
No monthly fees if balance stays above $500, otherwise $7 per month
No monthly fees if check card is used less than 6 times per month
$5 monthly fee
No minimum balance
$25 minimum balance
No minimum balance
Online banking services
Online banking services
Online banking services
Non-Bank X ATM fee - $2.00 per transaction
Non-Bank Y ATM fee - $1.50 per transaction
Non-Bank Z ATM fee - $2.00 per transaction

Henry usually has about $300 in his account at any given time during the month. He limits his ATM visits to one per week and is interested in banking online options. Bank X and Bank Z have 5 ATMs within a 5 mile radius of Henry’s work and his new home. Which bank should he choose?
a.
Bank X
b.
Bank Y
c.
Bank Z
d.
Bank X and Z

1 answer

To determine which bank Henry should choose, let's analyze the costs associated with each bank given his typical account balance of $300, his ATM usage (1 visit per week), and his requirement for online banking options.

Bank X:

  • Monthly fees: $7 (because balance is below $500)
  • ATM usage: 1 visit per week (4 visits/month)
    • Fee for using a non-Bank X ATM: $2.00 per transaction
    • Total ATM fees: 4 * $2.00 = $8.00
  • Total monthly cost: $7 (monthly fee) + $8 (ATM fees) = $15

Bank Y:

  • Monthly fees: $0 (because check card is used less than 6 times per month)
  • ATM usage: 1 visit per week (4 visits/month)
    • Fee for using a non-Bank Y ATM: $1.50 per transaction
    • Total ATM fees: 4 * $1.50 = $6.00
  • Total monthly cost: $0 (monthly fee) + $6 (ATM fees) = $6

Bank Z:

  • Monthly fees: $5 (no minimum balance)
  • ATM usage: 1 visit per week (4 visits/month)
    • Fee for using a non-Bank Z ATM: $2.00 per transaction
    • Total ATM fees: 4 * $2.00 = $8.00
  • Total monthly cost: $5 (monthly fee) + $8 (ATM fees) = $13

Summary of Monthly Costs:

  • Bank X: $15
  • Bank Y: $6
  • Bank Z: $13

Since Henry values online banking options and is looking for the lowest cost while considering his fees and ATM charges, Bank Y is clearly the best option with the lowest total monthly cost of $6.

Thus, the best choice is: b. Bank Y.