Dictionary of Banking Terms: target balance
target balance
desired balance in a deposit account that meets minimum standards for profitability, or the break-even yield. There are various formulas for pricing deposit accounts to cover servicing costs. If a checking account is priced separately from other deposit accounts, a bank may insist that the customer keep a minimum balance in the account at all times, say $1,500, to qualify for service charge-free checking. Abank may waive service charges for those customers who have a high-balance savings account, for example, a $10,000 money market certificate, or combination of accounts that are kept on deposit, or a compensating balance kept by a corporation.
