Analysis of checking account balances and prices to determine the existence and maintenance of an optimum balance that minimizes checking account costs

Abstract

Scope and Method of Study: This study was undertaken to determine the relationship between the number of checks written and the account balance maintained. The effects of price changes was also observed. An optimal balance was calculated based upon the price schedule and the number of checks written. A particular account was placed in the appropriate optimum balance based upon the number of checks written. The accounts were sampled in such a way that the exact sane account was not chosen each month, but the same general group was sampled.

Findings and Conclusions: There was no relationship found between the number of checks written and the balance maintained. When the optimum balance was zero during period one the R2 was 0.007, when the optimum balance was 200 dollars the R was 0.001. The only optimum balance during period two was 200 dollars and the R2 was zero. When the optimum balance was zero during period 2 three the R2 was 0.0092, when the optimum balance was 500 the R was 0.0007. During period one and period three when the optimum balance was zero the balance maintained was 526.55 and 575.40 dollars. During period one and two when the optimum balance was 200 dollars the balance maintained was 479.90 and 467.00 dollars. During period three when the optimum balance was 500 dollars the balance maintained-was 805.63 dollars. The price changes at the beginning of period two and three affected the average number of checks significantly (P.01 ). The average number of checks dropped from 34.06 during period one to 22.4G during period t110 and rose to 31.62 during period three. Throughout this study depositors were not purchasing and maintaining the correct balance. When the correct balance was zero only 5.7 and 3.87 percent purchased and maintained that balance during period one and three. When the optimum balance was 200 dollars during period one and two only 23.65 and 33.44 percent purchased and maintained that balance. When the optimum balance was 500 dollars 22.28 percent of the depositors purchased and maintained that balance.