Earnings Credit Rate (ECR) in Australia: 2025 Guide for Business Banking

As Australian businesses face tighter margins and higher costs in 2025, every line item on the bank statement is under scrutiny. One often-overlooked lever for managing transaction fees is the Earnings Credit Rate (ECR). If you operate a business account—especially with a transactional volume—understanding ECR could mean the difference between hundreds or thousands saved in fees each year.

What Is the Earnings Credit Rate (ECR)?

The Earnings Credit Rate is a mechanism offered by some banks to offset service fees on business accounts. Instead of simply paying fees for account maintenance, transactions, and cash handling, businesses can use the interest—or ‘earnings credit’—generated by their account balances to reduce or even eliminate these charges.

Think of ECR as a way to put your idle cash to work. Rather than earning direct interest (which is usually negligible on business transaction accounts), the notional interest is calculated using a set rate (the ECR) and applied as a credit against eligible bank fees.

• Example: If your account holds an average daily balance of $200,000 and your bank’s ECR is 1.20% p.a., you could generate around $2,400 in annual fee credits.

• Any unused credits typically don’t roll over month-to-month.

• ECR does not result in direct interest payments—just fee offsets.

2025 Updates: ECR Trends and Policy Shifts

The ECR landscape is shifting as the RBA holds the cash rate at 4.35% in early 2025, and banks adjust their business banking offerings. Here are the key developments:

• Variable ECRs: Most major banks, including NAB and Westpac, now offer ECRs between 0.80% and 1.50%, depending on account type and balances. These rates have crept up in line with higher official rates.

• Fee Restructuring: Some banks have increased transaction and service fees, making ECR offsets more valuable for businesses with substantial balances.

• Eligibility Changes: Banks have tightened the minimum balance requirements for ECR eligibility—often requiring $50,000 or more in average daily balances.

• Taxation: ECR credits are not considered taxable income, unlike direct interest payments, which can benefit certain business structures.

With these shifts, it’s crucial for businesses to review their account terms and compare ECR offerings—especially if monthly fees are a significant expense.

How to Maximise ECR for Your Business

To take full advantage of ECR in 2025, Australian businesses should:

• Maintain Higher Balances: The more cash you keep in your transaction account, the greater the earnings credit. This can offset nearly all your monthly bank fees if managed well.

• Analyse Your Fee Profile: Review your monthly fee statements. If you’re paying significant transaction or service fees, ask your banker if an ECR-linked account is available.

• Negotiate with Your Bank: ECR rates and minimum balance requirements can sometimes be negotiated, especially for long-standing or high-value business clients.

• Monitor ECR vs. Interest Accounts: For businesses with lower transaction fees or those able to lock away funds, a high-interest savings account may provide a better net benefit than ECR credits. Crunch the numbers based on your fee structure and balances.

For example, a logistics firm with a $500,000 average balance and $400 in monthly account fees could use an ECR of 1.2% to wipe out those fees entirely—while a retail store with smaller balances might be better off focusing on minimising transaction volumes.

Conclusion: ECR Is a Hidden Asset for Savvy Businesses

As banks adjust to a higher-rate environment in 2025, Earnings Credit Rates are becoming a more significant tool for Australian businesses to manage costs. If you’re leaving a large balance in your transaction account, don’t let those funds sit idle—talk to your bank about ECR options and keep more money in your business, not in bank fees.