Do you have a subsidiary in the United States? Are you monitoring your US cash management costs such as bank charges and electronic transaction fees? It is highly likely that these fees will increase in the near future and that your bills will be impacted. Here’s why.

What is cash management invoicing like in the US?

Obscure, complex and revised upwards by the banks every single year!

Although this is nothing new, the fact is that invoicing arrangements for cash management services in the United States are much more complex than in Europe. Monthly invoices have an average of more than 250 billing lines. Banks use specific codes and terminology to bill for each service. This terminology varies among banks. Given the large number of billing lines, cash management invoices are difficult to read and comprehend, and even more difficult to check!

Amid this hazy atmosphere, US banks usually raise the prices for their services each year. Companies’ cash management bills are increasing dramatically, not to mention the potential billing errors that could range on average up to 7% to 10% of bank charges.

The cost of US cash management services is expected to increase in the coming months.


ECR and netting of cash management costs impacted by the fall in Federal Reserve rates.

The Earnings Credit Rate (ECR) is the rate that US banks use to reward corporates for demand deposit account balances, provided that such reward only compensates, in whole or in part, for cash management service costs.

The ECR usually tracks the Federal Reserve Funds (FED) rate, even though determining the ECR granted to each client is at each bank’s discretion.

For example, in September 2019, although the FED rate was set at 1.75%, the average rate of ECR on demand deposit account balances for our clients operating in the US was 50 bps!

On March 15, the Federal Reserve made the decision to reduce its FED rate to zero in response to the COVID-19 crisis. As a result, ECR for demand deposit accounts will almost certainly disappear.

Companies will no longer be able to benefit from cash management netting through the ECR and will need to be prepared for fairly significant increases in their bank charges.

We advise you to be vigilant, since banks are under no obligation to notify clients of this change in ECR.


Electronic transactions — an unprecedented change in the structure of card transactions, affecting both B2C and B2B companies.

The major international networks (Visa, Mastercard and Discover) publish quarterly changes to their programs and rates. Historically, the April and October editions of the quarterly announcements contained the biggest changes. Due to the COVID-19 crisis, changes originally planned for April 2020 were postponed to July 2020 for Mastercard and April 2021 for Visa. These new card rates feature unprecedented changes—the most far-reaching in over a decade—with additions, deletions and changes to transaction tariffs in the major networks. For example, Visa is removing some charges, but adding new categories that represent a potential net increase of 85 bps, depending on the payment method used and how the data is processed.

The degree of the impact may vary, depending on the payment method and the type of card used. With the new card rates and the increasing use of bank cards, corporates will almost certainly notice an increase in US charges for this payment method. In our view, there is not much room to apply pressure to change or vary these new transaction rates, but it is nevertheless possible to manage certain key factors to limit their impact as well as check that transaction fee rates are correctly applied using the right tools, processes, systems and technical knowledge.

Evidently card payment methods are within the B2C sphere, but B2B payments represent considerable volumes and levels of costs that increase on a yearly basis. Bank cards are becoming an essential payment method for many B2B companies in the US, which can account for between 5% and 20% of payment receipts. This is so for various reasons such as not to lose sales or to provide a serious alternative to cheques which continue to be a major institution in the US.


To find out how to respond to these new challenges, don’t miss out on our publications and webinars on these topics in the coming weeks.

For any further information, please do not hesitate to contact your Redbridge advisor.

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