This article was last updated on May 26
After about one year of incorporation of my solopreneur business, I have managed to build a decent amount of savings that was earning exactly 0.01% in my business checking account. While I like the features of the checking account, it was not making my business savings work for me. So after receiving a promotional offer (a 1% bonus savings rate and $300 credit) from them for a new business savings account, I decided to pull the trigger and sign up for their business savings account.
For small business owners I think these type of accounts provide a great savings account option without all the costs and unnecessary frills of full service traditional savings accounts. I still kept my checking account, but was able to move my surplus funds to the savings account a couple of days after opening it. Both checking and savings accounts are linked electronically online (setup was easy and is part of the application process) and I can easily move money between the accounts.
Here are the key things to consider when it comes to choosing a good Business Savings Account:
Interest rate or Annual Percentage Yield (APY) Offered
You can see what the industry APY averages are via a simple google search. The account you choose should be paying more than this and make sure you look at the standard or normal APY and not only at any promotional or teaser rates they are offering. You may need to read the fine print for this. New (online banking only) players have historically offered a significantly higher APY than established providers because they want to build market share. However these teaser rates don’t last long and it can be a pain to close these accounts and move to a new one.
No Account Keeping Fees
This should always be the case. If a savings account is charging you account maintenance or other similar fees, move on. All reputable providers like Citibank, Chase and American express are good in this aspect than they don’t charge any fees for depositing or withdrawing funds. Make sure that you can also get (for free) separate/unique ID access for other people in your business. Having a separate Login PIN and Customer Number – allows added flexibility, security, and accountability.
Ease of use.
You can demo/see most of the reputable on-line banking user interfaces via their websites. See what you like and feel comfortable using. Generally the UI should have a very simple and easy to use interface and moving funds from and to your existing bank account is very straightforward.
You should also be able to provide your bank details to vendors and customers so that funds paid are deposited directly into your savings account and hence earn interest immediately. You should be able to sign-up online for business savings accounts and all you need to do then is mail or upload a few required documents like state incorporation documents (when your company is setup) to show your company is in good standing.
If the bank starts asking for too much confidential information – like tax returns etc, then be a little but wary. All they need the documents are to validate your company’s legitimacy and proof of good standing. They are not giving you a loan (in fact by depositing money, you are giving them a loan) so should not require onerous amounts of documentation.
Promotions and Sign-up Bonus.
With banks trying to sign-up new business customers all the time, you can invariably get a sign-up bonus when joining. Normally around quarterly tax time and year end is when I have seen the most promotions. These deals may be advertised, but if not just call up the bank and ask them what they can do for you. You would be surprised at what them may offer – particularly if you can show them a competitor offer. However like teaser rates, do not let promotional or sign-up bonus’ solely drive your account choice. Consider all the factors.
Like personal savings accounts make sure your business savings account is FDIC insured. If you find a financial institution trying to offer you significantly above average APY’s, check their insurance status at the FDIC website. If they are not insured, then it is best to avoid them. All deposit accounts are FDIC insured up to $250,000 per corporation, partnership or unincorporated association.
While the business savings account at my current bank was a good option for me, you should definitely shop around. Your current bank will most likely offer a business savings account so start there as a comparison point, but check their rates and minimum balances to earn higher interest rates. I found the online saving account providers offer much better rates because of their lower cost structure. Use the above checklist in making your decision and here’s to hoping for a prosperous savings account.