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

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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 higher than the current market interest rate and often tied to the price of low-risk government bonds. The ECR is calculated on the balances held within eligible deposit 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.


Average Monthly Balance X ECR X days in month / days in year = 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 monthly, 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 your banking team to find the best mix and structure of accounts to minimize your costs and maximize your earnings.

The History of ECR

Banks were previously prevented from offering interest on 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 earnings credit to help retain business and commercial customers, offering them a way to offset banking fees with their deposit balances held at the bank. Banks are no longer prevented from offering interest on demand deposit accounts, but earnings credit continues to be an option banks offer business and commercial customers.

How ECR is paired with an Analyzed Checking Account

As mentioned, the ECR is applied to balances kept in eligible deposit accounts, such as an Analyzed Business Checking account. This type of account is designed for businesses with significant transaction volume. An Analyzed Business Checking can be paired with treasury management services to satisfy a variety of payment collection, disbursement, reporting and fraud prevention needs. 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 with Treasury Management Services and offset fees with an applied ECR, please contact the Axos Commercial Banking team at 833-307-1542.


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

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

This blog post was published by Axos Bank on October 1, 2020 and last updated on October 6, 2020.

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