While we’ve said that you get earnings credit based on your account balance, we wanted to dig a little deeper into that.
The actual calculations can get pretty complicated, and they vary from bank to bank. You should definitely ask your bank about how it specifically calculates earnings credit.
That said, most banks set a rate for earnings credit based on the recent average Treasury Bill Rate. For example, your rate might be 5%, which then gets applied to your account balance.
You need to remember, though, that your bank might define your account balance differently than you do. It often doesn't include all your current assets in your checking account.
Many banks subtract 10% from your balance to account for the reserve requirement (a rule that requires banks to keep 10% of account balances on hand). And your bank will probably specify that you earn credit based on your collected balance―deposits that have actually cleared already.
Some banks also apply other complicated math―say, multiplying by days in a cycle and dividing by days in a year―so again, make sure you understand how your bank calculates earnings credit.
For the most part, though, you just need to remember that your earnings credit will be a percentage of your checking account balance.