MMAs sometimes have higher minimum deposit requirements than business savings accounts as well, which may prohibit some business owners from opening one of these. If you’ve ever had a personal savings account, you already know the basics of a business savings account. They earn more interest on your funds than checking accounts do (except some interest-bearing checking accounts will earn more than basic savings accounts). They provide a place to put your money, and you can add money, withdraw cash, transfer funds, or make payments from that account—just like your personal bank account. A merchant account is a bank account that allows business-to-consumer businesses to accept and process electronic card transactions. Any business that is receiving payments from consumers for their products and services is required to have one.
If you’re stuck between the idea of business saving accounts and CDs, money market accounts (MMAs) may be an option worth considering. These accounts also come with set guidelines on deposits, concerning both methods and amounts. With Chase Business Total Savings, for example, users are allowed up to 15 deposits and $5,000 in monthly cash deposits at no charge. You’ll just need to show the bank some documentation, like your employer identification number (EIN), social security number (SSN), business license, and articles of organization. So if you want a bigger return, and you can handle leaving your money alone to grow, a CD might be just the business savings account for you.
Take your business further with the experts in small business lending
King added that while some banks allow a sole proprietorship to open accounts without an EIN, creating one is still beneficial. Business banking helps limit your personal liability by keeping business funds separate from your personal funds. Find the answer in our ranking of the best banks for small-business checking.
- Some business checking accounts come with a line of credit you can tap if your business experiences a cash shortage.
- Business bank accounts are essential tools for managing operating cash flow, but the types of accounts needed vary by company.
- Payment processing companies are an increasingly popular alternative to traditional merchant services accounts.
- However, like CDs, these accounts may work best for businesses that keep higher monthly balances in savings.
- A business checking account can be a safe place to store and access business funds.
Though less restrictive than many business checking account transaction limits, this is still something to be mindful of when deciding on the best business savings account for your company. While interest rates can vary by financial institution, a business savings account typically offers a higher return than a business checking account. A business savings account also provides a safe place to store and access liquid funds, unlike other types of investments that may not be FDIC-insured. A business checking account can be a safe place to store and access business funds. The FDIC insures business bank deposits for many types of businesses, including money stored in FDIC-approved business checking accounts.
Types of Bank Accounts For Small Businesses
When shopping for one, it pays to carefully review the terms of service so you’re crystal clear on the transaction fees you’ll be paying. If your business has started making or spending money, you should get a business checking account. Kailey Hagen has been writing about small businesses and finance for almost 10 years, with her work appearing on USA Today, CNN Money, Fox Business, and MSN Money. She specializes in personal and business bank accounts and software for small to medium-size businesses. She lives on what’s almost a farm in northern Wisconsin with her husband and three dogs.
In addition to basic business savings accounts, you can get two kinds of specialized savings accounts. We’ll briefly explain them below, but you can check out our comparison of savings vs. money market vs. CDs for more information on their features and benefits. While we can’t make all the decisions for you, we can help you narrow down your options.
Just make sure the restrictions that come with it don’t lock away any necessary capital. Money market accounts (not to be confused with money market funds) are similar to savings accounts in that they offer higher interest rates in exchange for certain restrictions. These interest rates come from the money markets, i.e., the market for borrowers and lenders of short-term loans. Just as you might open a personal savings account to piggybank away your extra cash, businesses will also open savings accounts to store and earn interest on any excess capital they might be hanging onto.
Money market savings accounts tend to have higher APY than normal savings accounts (usually more than 0.05% but less than 0.5%), but they also give you some access to your funds. You can add money whenever you want (just like standard savings), though your bank may still have a limit on how often you can withdraw funds (depending on your bank). At its core, business MMAs are similar to savings accounts and they also limit you to six monthly penalty-free withdrawals per federal law.
Related Reading
Business bank accounts help you professionally manage your business finances and separate those funds from your personal finances. Opening a business bank account requires more effort than opening a personal account. There are documents to gather, names to be determined and licenses to get in order. Learn why you should have a business bank account and what you need to do to open one. You have plenty of options for free business checking accounts if you don’t want to pay a monthly service charge. Most business savings accounts are also insured by the Federal Deposit Insurance Corporation (FDIC), which protects your cash deposits in case of bank failure.
When you’re opening your business bank account, make sure to read all of the details on the financial institution’s site to ensure any limits align with your anticipated transaction volume. Some banks provide an option for a line of credit that you can use in an emergency. Many also offer business credit cards that you can use to start building a credit history for your fledgling business. Wish you could find a happy medium between traditional savings accounts and CDs? Merchant accounts serve as a kind of bridge between these new forms of payment and a traditional bank account. If you plan to do business online or accept multiple forms of payment, a merchant account is a must.
An alternative to a savings account, a CD account can earn your business even more in interest. This is commonly referred to as the CD term and can range from a few months to several years. If you take money out of your CD before the term is up, you’ll be required to pay a steep penalty charge.
Set your business up for success with a checking account that has no monthly or overdraft fees and earns you up to $5,000 in interest each year. And if you want to get even more benefits from your checking account, you might consider an interest-bearing checking account. If you do decide to stick with one bank, consider looking for one that offers several business credit options as well, including business lines of credit, in case you need these in the future.
John and Kelly want to open a business bank account to keep the funds from their auto repair shop separate from their personal funds. To open a business bank account, you’ll need to present documents proving your identity and your business’s legitimacy. Here’s more information about each of the documents you’ll need to open a business bank account.
Things to consider when choosing a bank for your business account
In other words, if you plan to constantly pay for expenses from your business bank account, you should probably stick to a checking account. Selecting a new business bank account and setting it up can seem like a daunting task. There are numerous options to explore – all of which have been developed to help you, a small business owner, effectively manage your money. Though the best bank truly depends on your specific needs, US Bank is one potentially attractive option for small businesses. There are no monthly fees for its Silver Business Package and the institution offers different options as your business grows. Meanwhile, online banks such as Bank Novo can be a great free starter option for freelancers looking for a business bank account that doesn’t require a heavy lift.
- There are free business checking accounts that waive monthly fees or exclude them altogether.
- Like a personal checking account, a business checking account is typically used for an organization’s day-to-day transactions, such as purchases or bill paying.
- Therefore, a business CD isn’t usually a good idea unless you’re confident you won’t need your money before the maturity date.
- Banks and credit unions primarily offer the same services to customers and members.
For more detailed instructions, we have a guide on how to open a business bank account. Though our favorite interest-bearing checking account at Bluevine offers 2.0% APY on balances up to $250,000 ― and that’s the best rate we’ve found by far. Entrepreneurs have a few options when it comes to storing their business’s money. For merchant accounts, banks usually provide purchase protection to ensure that your customers’ information is secure. If you have a certain amount of excess capital that you know you won’t need for a while, locking it away in a CD can earn you more interest than you would receive in a savings or money market account.
If you open one with a credit union, your deposits will probably be insured by the National Credit Union Administration (NCUA) instead. Most businesses will need at least one of the accounts above and many will need more than one. Think about what your goals are before deciding to open a business bank account. If you just need a temporary holding place for your income and a way to pay your operating expenses, a business checking account may be all you need. Many business checking accounts also integrate with popular business tools, including accounting software.
Here’s a breakdown of four different types of business bank accounts and how to choose the right one for you. If you need a place to keep extra earnings you’re not ready to spend yet, a business savings account, CD, or MMA is a better choice. And if you plan to accept credit or debit card transactions, a merchant account is probably a necessity. If you want a place to store extra funds and let them grow in value, a business savings account could be the right choice for you. This type of account enables you to earn a competitive interest rate on your savings.
In this guide, we’ll tell you all about the various kinds of business bank accounts. A business checking account is critical for entrepreneurs to separate their personal finances from their business ones. Having two separate accounts is especially important during tax season, as it allows you to distinguish business and personal financial documents in an organized fashion. Unlike the other accounts on this list, merchant accounts are unavoidable if your business plans to accept cards and other forms of payment.
