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#275510 - 11/16/04 06:22 PM Charging business accts for using uncollected fund
trout22 Offline
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Joined: Nov 2004
Posts: 313
Please excuse me if this has been posted lately, my BOL search engine isn't cooperating today. I read a post last week where someone said they charge their business accounts a certain amount/percent (I want to say 3%)for using uncollected funds to pay checks.

Could anyone fill in the necessary gaps to this story? We do nothing of the sort, but it sounds like it could be a great plan, if I knew some more details.

Thanks!

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#275511 - 11/16/04 06:46 PM Re: Charging business accts for using uncollected fund
Jokerman Offline
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Joined: Nov 2003
Posts: 12,846
Service charge routines for businesses generally include a charge for use of uncollected funds. I would expect that what you read said 3% over prime, not 3%, as that would be the cheapest unsecured line of credit ever.

What gaps are you looking to fill in?

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#275512 - 11/17/04 06:42 PM Re: Charging business accts for using uncollected fund
trout22 Offline
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Joined: Nov 2004
Posts: 313
Well, I'm not sure. I wasn't very specific in the original post, because I really don't know what questions to ask. So let me try this again.

1. The scenario I had in mind was to charge a fee for business deposit customers who continuously write checks on uncollected funds. We usually pay their checks (even though funds have yet to be collected) - is this a type of situation where other banks charge 3% over prime for this "service"??"

2. Would the 3% over prime figure be assessed per check, for the total amount the check is written for, and that would be the total charge assessed??

Any other information you could give me, without having to divulge confidential bank information about your policies, would be much appreciated.

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#275513 - 11/17/04 07:26 PM Re: Charging business accts for using uncollected fund
Jokerman Offline
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Joined: Nov 2003
Posts: 12,846
Usually, your monthly service charge routine can be edited to assess this charge for the daily negative collected balance. It would, of course, be offset by earnings for days when the account has a positive collected balance (often tied to a t-bill rate, but different banks have different ways of calculating earnings credit).

Your scenario in #1 is the type of customer that would be affected by such a policy. On #2, this has nothing to do with individual checks - it is based on the balance.

Example: for 10 days, the business runs a negative collected balance, averaging $5,000 for those 10 days. For another 20 days, the business runs a positive collected balance, averaging $4,000 for those 20 days. Other fees (per check, per deposit, per item, and maintenance fees) total $15. The bank allows an earnings credit of 2.5%, and charges 7.5% on uncollected funds.

Charges: $15
Less, Earnings Credit (2.5%/365*20*4,000): $5.48
Plus, Uncollected Funds Charge (7.5%/365*10*5,000): $10.27

Total Service Charge Assessed: $19.79

I've also seen banks that simply charge an uncollected funds charge or grant an earnings credit based on the monthly average. In the example above, the account has an average collected balance of $1,000. If credit was granted based on that, the business would receive an earnings credit of just over $2 (and would not be assessed an uncollected funds charge) to offset their charges.

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#275514 - 11/18/04 02:52 PM Re: Charging business accts for using uncollected fund
trout22 Offline
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Joined: Nov 2004
Posts: 313
Thank you Jokerman, that clears things up tremendously.

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