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How to shop for Business Savings Accounts
If you're looking for a business savings account, SuperMoney's tools enable you to compare and filter savings accounts by rates, terms, and features, ensuring you find the best match for your business's financial strategy.
A business savings account is an essential tool for managing your company's finances, providing a secure place for your funds while earning interest. Compared to checking accounts, savings accounts often have lower fees and requirements. Setting aside funds regularly can enhance your business's financial stability and prepare you for unexpected expenses.
Not all savings accounts are created equal. SuperMoney's tools can help you compare and filter savings accounts based on the rates, terms, and features that matter most to your business.
How do you compare business savings accounts?
Every bank's savings accounts have unique features. To find the right one for your business, identify the most critical aspects for your financial operations. Consider factors such as minimizing fees, maximizing interest returns, ensuring robust customer service, and assessing the financial strength of the bank. Here are the main factors to evaluate:
- Interest rate yields
- Frequency of interest rate changes
- Minimum deposit requirements
- Withdrawal or transfer restrictions
- Account features
- Procedures for closing an account
- Quality of customer service
- Branch availability
- Fees (e.g., overdraft, wire transfer)
- Financial strength and stability
- Deposit insurance strategies
Ideally, a business savings account should offer a high interest rate, low fees, strong customer support, and flexible access options. Let’s explore these factors in detail.
Minimum deposit requirement
Many savings accounts require a minimum deposit. Accounts with high annual percentage yields (APY) often demand a significant initial deposit. However, options with lower minimum balances are available, although they may offer lower interest rates.
Minimum balance requirement
Maintaining a minimum balance is often necessary to avoid fees. Banks may calculate this using the average daily balance or the minimum daily balance. Ensure your business can consistently meet the required balance to avoid penalties.
Fees
Business savings accounts may have various fees, including maintenance, withdrawal, and transfer fees. Selecting an account with minimal fees that align with your business's financial activities is crucial to avoid unnecessary costs.
Interest rate (APY)
The interest earned on your savings is a key consideration. Compare APYs across accounts to maximize your returns. Higher rates can significantly impact your business's earnings over time.
APY minimum balance
Some accounts offer tiered interest rates based on your balance. Ensure you understand the conditions for higher APYs and maintain the necessary balance to benefit from these rates.
Accessibility
Online and mobile access to your savings account is essential for managing funds efficiently. Ensure the bank provides robust digital platforms without extra fees.
Financial strength and stability
Assessing the financial strength of a bank is crucial, especially for businesses with deposits exceeding the FDIC insurance limit of $250,000. A bank's financial health can impact its ability to safeguard your funds and provide reliable services. Research the bank’s financial statements, credit ratings, and industry reputation to ensure it is financially robust.
Deposit insurance strategies
For businesses with large deposits, spreading funds across multiple banks can increase the amount of insured deposits. Some banks offer services that automatically distribute your deposits across several institutions to maximize FDIC coverage. This strategy, known as a deposit sweep program, helps protect your funds beyond the standard insurance limits, providing greater security and peace of mind.
When selecting a business savings account, considering these factors will help you find the best option to support your financial goals and ensure the security of your funds.
What types of business savings accounts are there?
Businesses have several savings account options, each with unique benefits:
- Regular savings account: Offers interest and easy access with low fees.
- Money market account: Typically provides higher interest rates but requires higher minimum balances and may limit check writing.
- Certificate of deposit (CD): Provides fixed interest rates for set terms but limits access to funds.
- Automatic savings plans: Facilitate regular transfers from checking to savings, often reducing fees.
- Online-only savings accounts: Usually offer higher interest rates and lower fees due to reduced overhead.
- Goal-oriented savings accounts: Help track progress towards specific financial goals, like equipment purchases or expansion funds.
- Deposit sweep programs: Automatically distribute deposits across multiple banks to maximize FDIC insurance coverage.
Business checking accounts vs. business savings accounts
Understanding the differences between business checking accounts and business savings accounts is crucial for effectively managing your company's finances. Each type of account serves distinct purposes and offers unique features that can benefit your business in different ways. Here’s a comparison of the two, along with guidance on what features to prioritize when shopping for each type of account.
Purpose and usage
Business checking accounts: These accounts are designed for everyday transactions, such as paying bills, managing payroll, and handling other operational expenses. They provide easy access to funds and often come with features like check-writing capabilities, debit cards, and the ability to make electronic transfers.
Business savings accounts: These accounts are intended for storing surplus funds that are not needed for immediate expenses. They earn interest on the deposited amount, helping your business grow its reserves. Savings accounts are ideal for setting aside money for future investments, emergency funds, or other long-term financial goals.
Transaction limits and fees
Business checking accounts: Typically, these accounts offer unlimited transactions, making them suitable for frequent and varied financial activities. However, they may come with monthly maintenance fees, overdraft fees, and other charges associated with daily banking operations.
Business savings accounts: Savings accounts usually have transaction limits, such as a restricted number of withdrawals or transfers per month. Exceeding these limits can incur fees. Additionally, they may charge maintenance fees if minimum balance requirements are not met, but generally, the fee structures are designed to encourage saving rather than spending.
Interest rates
Business checking accounts: These accounts often offer little to no interest on the balance, as their primary function is to facilitate transactions rather than generate earnings.
Business savings accounts: Savings accounts typically offer higher interest rates, making them a better option for earning a return on your surplus funds. The interest rates can vary significantly, so it’s important to shop around for the best APY (Annual Percentage Yield).
Account features to consider
When shopping for business checking accounts, prioritize the following features:
- Transaction fees: Look for accounts with low or no fees for transactions, including deposits, withdrawals, and transfers.
- Overdraft protection: Ensure the account offers overdraft protection to avoid costly fees if your balance goes negative.
- Accessibility: Choose a bank that provides convenient access through branches, ATMs, and robust online and mobile banking platforms.
- Integration with business tools: Check if the account integrates seamlessly with accounting software, payroll services, and other financial tools your business uses.
For business savings accounts, focus on these features:
- Interest rates: Compare APYs to find an account that offers competitive interest rates to maximize your earnings.
- Minimum balance requirements: Look for accounts with reasonable minimum balance requirements to avoid fees and ensure accessibility to your funds.
- Fees: Assess the account’s fee structure, including maintenance fees, transaction fees, and penalties for exceeding transaction limits.
- Deposit insurance: Ensure the account is covered by FDIC or NCUA insurance to protect your funds, and consider deposit sweep programs for larger balances.
Choosing the right account for your business
The choice between a business checking account and a business savings account depends on your company’s financial needs and goals. For day-to-day operations and frequent transactions, a business checking account is essential. It offers the flexibility and accessibility required for managing operational cash flow. Conversely, a business savings account is ideal for earning interest on surplus funds and building a financial cushion for future needs.
In many cases, businesses benefit from having both types of accounts. This approach allows you to handle everyday expenses efficiently while maximizing the earnings potential of your reserve funds. By carefully evaluating and selecting the right features for each account type, you can optimize your business's financial strategy and ensure long-term stability and growth.
Business savings accounts vs. certificates of deposit for businesses
Certificates of Deposit (CDs) offer higher interest rates than regular savings accounts in exchange for locking in your funds for a set period. For businesses, this could mean better returns on idle cash. However, early withdrawals from CDs incur penalties, making them less flexible for immediate cash flow needs. Compare CD rates with savings accounts to determine the best fit for your business's liquidity and investment goals.
Frequently asked questions
What are the benefits of having a business savings account?
A business savings account is a secure place to store extra funds, earning interest while keeping them accessible for unforeseen expenses. It helps separate operational funds from reserves, aiding in financial organization and planning.
How do I choose the best business savings account for me?
Choosing the best business savings account involves comparing interest rates, fees, and features. Look for accounts with competitive rates and minimal fees, and ensure the bank offers the necessary services, such as branch access or a mobile banking app. Also, verify that the account is covered by FDIC or NCUA insurance for added security. For larger deposits, consider a deposit sweep program to maximize insured coverage.
How do I open a business savings account?
To open a business savings account, you'll need to fill out an application either online or in person. Commonly requested documents include an employer identification number (EIN) or Social Security number, business license and formation documents, and ownership agreements. Providing accurate information will streamline the process and help establish your account efficiently.
How much can a business earn with a savings account?
The earnings from a business savings account depend on the interest rate and balance. Higher APYs and larger deposits yield greater returns, contributing to the business's financial growth.
Are online-only business savings accounts a good option?
Online-only accounts often offer higher interest rates and lower fees. However, consider the need for physical branch access and evaluate the pros and cons based on your business operations.
What is the difference between a savings account and a money market account?
A savings account generally offers lower interest rates but fewer restrictions. A money market account typically provides higher rates and allows check-writing privileges, but may require a higher minimum balance and have more fees.
How to find the best business savings account for you
Finding the best business savings account requires identifying what you want in an account. Use SuperMoney's comparison tools to evaluate features, fees, and interest rates, and read consumer reviews to make an informed decision.
Key takeaways
- Shop around for competitive interest rates to maximize your business savings.
- Minimize fees by choosing accounts with low or no maintenance and transaction fees.
- Consider your need for branch access versus the benefits of online-only banks.
- Ensure your chosen account offers FDIC or NCUA insurance for financial security.
- Evaluate account features like mobile banking and automatic savings plans.
- For large deposits, consider using deposit sweep programs to maximize insurance coverage.