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Karen has \$800 to open a checking account. She wants an account with the lowest fees. She only writes about five checks per month and her employer has direct deposit. She does not plan on using the ATM or online banking.



\begin{table}

\captionsetup{labelformat=empty}

\caption{Bank Account Terms and Conditions}


Minimum BalanceOnline bankingCheck LimitsATM FeesMonthly Fee

A		\$500yesunlimited\$0 for all ATMs\$5

B		\$250yes15 per month\$0 for ABC bank ATMs\$10

C		\$50yes\$0.08 each\$2 per transaction\$0 with direct deposit

D		\$100noover 10 \$0.12 each\$3 per transaction\$2




\end{table}



Which checking account would be best for Karen?


AAccount A
BAccount B
CAccount C
DAccount D

Verified Answer :

  • Karen's banking needs are evaluated against the fees for accounts A, B, C, and D.
  • Monthly costs are calculated: Account A (\(\$5\)), Account B (\(\$10\)), Account C (\(\$0.40\)), and Account D (\(\$2\)).
  • The costs are compared to identify the minimum expense.
  • Account C is found to have the lowest monthly fee of \(\$0.40\), making it the best choice.
  • Final Answer: \(\boxed{\text{Account C}}\)

Explanation

  1. Analysis of Karen's Banking Requirements

We start by analyzing Karen's banking needs based on her specific usage profile. Karen has an initial deposit of \(\$800\), which allows her to meet the minimum balance requirements for all four accounts (A, B, C, and D). She writes approximately 5 checks per month, utilizes direct deposit, and does not use ATMs or online banking services. To find the most cost-effective account, we must calculate the total monthly fees for each option based on these constraints.

  1. Calculating Total Monthly Fees for Each Account

Now we calculate the monthly costs for each account:

  • Account A: The monthly fee is \(\$5\). Since she writes 5 checks (which are unlimited) and has no other costs, the total monthly cost is \(\$5\).
  • Account B: The monthly fee is \(\$10\). Her 5 checks fall within the 15-check limit, and with no ATM usage, the total monthly cost remains \(\$10\).
  • Account C: The monthly fee is \(\$0\) because she uses direct deposit. She pays \(\$0.08\) per check. For 5 checks per month, the cost is \(5 \times \$0.08 = \$0.40\). The total monthly cost is \(\$0 + \$0.40 = \$0.40\).
  • Account D: The monthly fee is \(\$2\). The first 10 checks are free, so her 5 checks incur no additional cost. The total monthly cost is \(\$2\).
  1. Comparison and Conclusion

Comparing the calculated monthly costs:

  • Account A: \(\$5\)
  • Account B: \(\$10\)
  • Account C: \(\$0.40\)
  • Account D: \(\$2\)

The lowest monthly cost is \(\$0.40\), which corresponds to Account C. Therefore, Account C is the most economical choice for Karen given her activity profile. Thus, the final answer is Account C.

Examples

Selecting the right bank account is a practical application of budgeting and mathematical comparison. By analyzing fixed monthly costs versus variable fees (like per-check charges or ATM fees), you can optimize your personal finances. This same logic is used when comparing utility plans, subscription services, or cell phone packages to ensure that your chosen service matches your actual usage patterns, ultimately saving money over the long term.

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