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Sharon wants to open a checking account to pay bills. She wants online services and a debit card, which both banks provide for free. Based on past experience, she expects to accidentally overdraft the account once per year due to unexpected charges and miscommunications. She expects no second copies of statements and to use network ATMs four times per month with either bank. She has \$3300 in an emergency savings account at First State Bank and believes that this balance will be enough to cover overdrafts in the future if automatic transfers are made when needed.

\begin{tabular}{|c|c|c|c|}
\hline
\textbf{First State Bank} & & \textbf{Common Bank} & \\
\hline
\textbf{Feature} & \textbf{Description} & \textbf{Feature} & \textbf{Description} \\
\hline
Monthly fee & \[tex]$4 & Monthly fee & \$[/tex]0 \\
\hline
Non-sufficient funds & \[tex]$36 & Non-sufficient funds & \$[/tex]24 \\
\hline
Second copy of statement & \[tex]$7 & Second copy of statement & \$[/tex]4 \\
\hline
Network ATM usage & \[tex]$3 each transaction & Network ATM usage & \$[/tex]2 each transaction \\
\hline
\begin{tabular}{l}
Non-sufficient funds \\
protection from a First \\
State Bank savings \\
account
\end{tabular} &
\begin{tabular}{l}
\$4 on each day that a \\
transfer occurs to cover \\
an overdraft
\end{tabular} &
\begin{tabular}{l}
Non-sufficient funds \\
protection from a \\
Common Bank savings \\
account
\end{tabular} &
\begin{tabular}{l}
Not offered with this \\
account
\end{tabular} \\
\hline
\end{tabular}

Based on the tables of fees above, if Sharon chooses First State Bank, will it save her money over choosing Common Bank?



Answer :

GinnyAnswer
To determine which bank saves Sharon money, we need to calculate the total annual cost for each bank based on her expected banking habits:

### First State Bank Costs

1. Monthly Fee:
- \$4 per month
- Annual cost: \[tex]$4 12 = \$[/tex]48

2. Overdraft Fee:
- \$36 per overdraft
- Annual cost: \[tex]$36 1 = \$[/tex]36

3. Automatic Transfer Fee (to cover overdraft):
- \$4 per transfer
- Annual cost: \[tex]$4 1 = \$[/tex]4

4. Network ATM Usage Fee:
- \$3 per transaction
- Expected use: 4 times per month
- Annual cost: \[tex]$3 4 12 = \$[/tex]144

Adding up all the costs for First State Bank:

Total Annual Cost = \[tex]$48 (monthly fees) + \$[/tex]36 (overdraft fee) + \[tex]$4 (transfer fee) + \$[/tex]144 (ATM fees) = \$232

### Common Bank Costs

1. Monthly Fee:
- \$0 per month
- Annual cost: \[tex]$0 12 = \$[/tex]0

2. Overdraft Fee:
- \$24 per overdraft
- Annual cost: \[tex]$24 1 = \$[/tex]24

3. Network ATM Usage Fee:
- \$2 per transaction
- Expected use: 4 times per month
- Annual cost: \[tex]$2 4 * 12 = \$[/tex]96

Adding up all the costs for Common Bank:

Total Annual Cost = \[tex]$0 (monthly fees) + \$[/tex]24 (overdraft fee) + \[tex]$96 (ATM fees) = \$[/tex]120

### Comparison

- Total Annual Cost for First State Bank: \$232
- Total Annual Cost for Common Bank: \$120

By comparing the total annual costs, we see that it is more expensive for Sharon to use First State Bank. Therefore, choosing First State Bank will not save her money compared to Common Bank. The savings by choosing Common Bank would be \[tex]$232 - \$[/tex]120 = \$112 annually.

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