Earnings Credit Allowance (ECA) vs Earnings Credit Rate (ECR)


If your company performs a high number of banking transactions, you know how quickly the monthly and per-transaction fees can add up. Fortunately, there are ways to reduce or cover those costs.

One way to offset banking fees is through an Earnings Credit Allowance (ECA). An Earnings Credit Rate (ECR) is the rate applied to an account balance. It’s typically slightly less than the current market interest rate or tied to the price of low-risk government bonds. The ECR is calculated on noninterest-bearing accounts. The resulting Earnings Credit Allowance (ECA) can be used to cover the costs or fees incurred from the bank. It is not a cash offering, nor are the earnings taxable.

Balance X ECR = ECA

Monthly ECA - Gross Monthly Service Charges = Net Earnings Credit/Deficit

In a nutshell, depending on the balance kept in your account, the earned credit allowance can significantly reduce the amount you pay on transaction fees or may cover them completely.

The ECA is calculated daily, applied automatically to cover banking fees for that account, and is visible on the monthly account analysis statements. Whereas interest earned on any account is taxable, an earnings credit is not considered income. Any excess of earned credit disappears, so it’s important to work with the bank’s client services to find the best mix of accounts to minimize your costs and maximize your earnings.

The History of ECR

Banks were previously prevented from offering interest on commercial demand deposit accounts during the Great Depression under Regulation Q1. It was a way to encourage companies to invest in other interest-earning or value-appreciating alternatives instead of depositing cash in banks. The banks created the earnings credit to help retain customers, offering them a way to offset banking fees. Banks are no longer prevented from offering interest on commercial demand deposit accounts. But the earnings credit continues to be an option banks offer business customers.

How ECR is paired with an Analyzed Checking Account

As mentioned, the ECR is applied to balances kept in a noninterest-bearing account, such as an Analyzed Business Checking account. This type of account is designed for businesses with significant transaction volume. An Analyzed Business Checking account also comes with treasury management services to satisfy a variety of payment collection, disbursement, and processing needs. Plus, it provides custom reporting and account reconciliation. Treasury management strategies are essential for managing your cash position. Coupled with an earnings credit allowance to offset banking and treasury management fees, it’s a winning combination for your business.

To find out more about how you can establish an Analyzed Business Checking account and offset fees with an applied ECR, please contact the Axos Commercial Banking team at 844-205-0249.


1. Will Kenton, “What Is Regulation Q?” Investopedia, updated November 1, 2019

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Earnings Credit Allowance (ECA) vs Earnings Credit Rate (ECR)