Earnings Credit Rate: The Quiet Profit Driver

The Earnings Credit Rate (ECR) often gets overlooked in community banks. Yet it plays a crucial role in treasury management profitability. This is part 3 of our 8-part series on Why Treasury Management Excellence Matters.

When managed well, the ECR allows business customers to earn credits on their deposit balances to offset treasury management fees. When neglected, it can lead to inconsistent fee income, dissatisfied clients, and lost revenue opportunities.

Many institutions either set their ECR once and forget about it or assign a rate without any structured methodology. One approach is to tie the ECR to a standard market benchmark, such as the 90-day Treasury Bill rate (assuming that rate is not too high – if you set it too high, you are effectively giving a significant portion of your services away). Then, review and adjust the rate quarterly in your ALCO meetings to keep it aligned with market conditions, competitors, and your institution’s balance sheet needs.

Monitoring the ECR regularly not only protects your TM income but also provides transparency to your business customers. Customers appreciate seeing a clear, fair calculation for how their balances offset their banking fees.

Neglecting the ECR is like leaving pricing power on the table. By treating it as a strategic tool, you can improve treasury management profitability and customer satisfaction simultaneously.

Want to go for a deep dive on how to set your earnings credit rate? We cover it throughout the training courses in our Framework. See how our training can help.

👉 Learn more about our Treasury Management Framework