What are Hard Charges?

From my experience, banks send service charges one of four ways: analyzed, hard, waived, or debited.  Usually, most bank services are sent as analyzed charges on an account analysis statement but what are hard charges?

A hard charge means it cannot be offset by any earnings allowance the account may have earned for the period.  This makes these service charges very important since any earnings earned can't be used to lower your total service fees due balance.

Hard Charges are sent on an account analysis statement as Service Charges - Non Balance Compensable.  

All hard charges for one account during a particular time frame should be shown as this balance.  In older versions of an EDI 822 file, the SER segment denotes a hard charge usually by sending the Balance Required field as 0.00.  Since the Balance Required field indicates the balance required in the bank account to offset $1 of service charges, it makes sense that for hard charges this field would be zero.

Why are Hard Charges important to know for Account Analysis?

As mentioned earlier, hard charges can't be offset by the earnings allowance so this makes them fee-based services.  A fee-based service means they will always incur a fee for their activity.  This reminds me of hybrid costs; fixed as far as the account holder will always expect to incur a fee which cannot be offset but also variable in that the amount of this fee is determined by the volume or the service's level of activity. Amongst other things, higher fixed costs may result in a higher breakeven point and/or higher operating leverages.

Happy Analyzing!