In: Finance
Randy, a student, has $322 to deposit in a new checking account, but Randy knows he will not be able to maintain a minimum balance. He will not use an ATM card, but will write a large number of checks. Randy is trying to choose between the unlimited check writing offered by South Trust and the low per-check fee offered by Sun Coast. How many checks would Randy have to write each month for the account at South Trust to be the better option? For the account at South Trust Bank to be the better option, the number of checks Randy would need to write each month is
South Trust Bank | Sun Coast Bank | ||
ATM charges: | |||
Home bank | Free | Free | |
Other bank | $1.49 per use | $1.49 per use | |
Checking: | |||
Minimum deposit | $1 | $1 | |
Minimum balance required to avoid fees* | $500 | N/A | |
Monthly fees | $6.00 | $3.00 | |
Check-writing charges | Unlimited | Each check 25 cents | |
* N/A means monthly fees apply irrespective of account balances. |
Total Charges under south trust bank per month = $6.00
Total charges under sun coast bank per month = $3.00 + number of check write * $0.25
indifferent point
$6.00 = $3 + number of check write * $0.25
$3.00 = number of check write * $0.25
Number of checks written to break even = 12 checks
Randy has to write 13 (12+1) checks every month to make south trust bank favorable
Answer = 13 checks