A business savings account is a must-have for every successful entrepreneur. It can serve as a place to keep the cash that you don’t need immediately. The money earns interest and can also be accessed quickly if you require it.
But which bank should you open an account at?
There’s a great deal of choice, and it can get very confusing.
In this post, we’ll identify the top savings accounts so that it’s easier for you to decide. However, before we list the top savings accounts, let’s see why this type of account should form an essential part of your financial profile.
Business Checking Accounts & Savings Accounts
The first thing you should know is that checking accounts and savings accounts work in tandem. In fact, when you begin operations, you’re likely to need a checking account first. That’s because you’ll use it for your day-to-day operations.
With a checking account:
- You can make multiple deposits and withdrawals. These accounts are traditionally used for a company’s transactional needs. Business owners use them to pay their suppliers and employees. Money collected from customers is deposited into these accounts.
- It’s easy to access your money from a checking account. Most banks allow you to issue checks, withdraw funds from ATMs, and transfer money through electronic debits.
- It’s necessary to monitor the fees that you will be charged. The bank may require you to pay extra if the number of checks you issue exceeds a specific limit. There could also be a penalty for not maintaining a minimum balance.
There’s a downside to the convenience and liquidity that checking accounts offer. It’s highly likely that you won’t earn any interest on the balance that you have in the bank.
So, where does a savings account fit into all this?
The primary benefit of a savings account is that you can earn interest on the funds that you keep in it. Business owners transfer their extra cash into these accounts. The interest accumulates steadily, and your money is available when you need it.
Banks usually offer interest on savings accounts and not on checking accounts.
That’s because the money that you deposit in a savings account is less likely to be withdrawn within a short period. As their name implies, they’re savings accounts. They help you to build a cash cushion that can be used in specific circumstances or emergencies.
But do you need a business savings account?
The answer is yes, especially if your company isn’t new.
Why you need a business savings account
Here’s a quick summary of the reasons why you need a business savings account:
It helps you save for emergencies
What will you do if your business runs short of money? A savings account can help you to accumulate funds for any unexpected requirements.
A savings account can help you collect funds for a new project
You may need money for a new marketing campaign or to open at a second location. Set aside a little money every time you have a surplus. This will allow you to accumulate the targeted sum.
The best part is that your cash won’t lie idle. It will increase with the interest that the bank credits to your account.
You can save the money you need to pay your taxes
It’s an excellent way to collect money to meet your tax obligations.
It can help you raise a loan
When you approach a lender for funds, their primary concern is to analyze whether they will get their money back. They’ll ask to see your financial statements and several other documents.
They will also need a copy of your bank statements. If you have accumulated a significant sum in your savings bank account, it will create a good impression with the lender. You’ll have a better chance of getting your loan approved.
The federal government insures savings accounts—your money is safe
The U.S. government’s Federal Deposit Insurance Corporation (FDIC) protects you against loss if the bank at which you have deposited your money fails.
You’re covered up to a sum of $250,000 at each FDIC-insured bank. Interest is included in the coverage if the total amount is within the quarter-million-dollar limit.
When you decide to open a savings bank account, make sure that you find one that meets your specific needs. You’ll have to navigate interest rates, service fees, ATM usage limits, and a lot more.
To help you make an informed choice, we’ve done the heavy lifting for you. Here’s a list of the top savings accounts that we have prepared. Take a look at their features and choose the one that best fits your needs.
The top savings accounts for small businesses
Here’s a list of some of the best savings accounts that are available for small business owners:
1. Live Oak
Live Oak Bank started its operations in 2009. It specializes in originating business loans that are guaranteed by the U.S. Small Business Administration.
Money that is deposited in a savings bank account with Live Oak Bank earns an APY of 1.10%.
It stands for Annual Percentage Yield. It’s the real return that you earn on your savings—it takes the effect of compounding into account.
Live Oak savings bank accounts are FDIC-insured. Interest is compounded daily, and there are no monthly maintenance fees. However, you’re limited to six free transactions per week. Each transaction above this limit will attract a $10 fee.
Here’s a list of the other fees that you could have to pay:
- Stop payment fee: $25
- Returned item fee: $10
- Non-sufficient funds (NSF) fee: $25
- Legal actions (tax levies, garnishments, etc.): $50 minimum
- Incoming wire: $15
- Outgoing wire: $19
2. Axos Bank
San Diego-headquartered Axos Bank was formerly known as Bank of Internet USA. It specializes in equipment financing and factoring.
Savings bank accounts at Axos Bank are FDIC insured. If you deposit a sum less than $24,000, you won’t earn any interest. But amounts higher than this obtain an APY of 1.06%.
A Business Premium Savings account in Axos Bank has the following features:
- APY of 1.06%
- Minimum opening deposit of $25,000
- No monthly maintenance fee
- No average daily balance requirement fee
- Remote deposit from anywhere
If you can’t afford an opening deposit of $25,000, you could opt for a Business Savings account.
- The minimum opening deposit is only $1,000.
- The interest rate that the bank pays is lower. The APY is only 0.80%.
- You’re also required to pay a $5 monthly maintenance fee if your average daily balance falls below $2,500.
JPMorgan Chase Bank is the largest bank in the United States by assets. Its headquarters are in New York City.
You can choose between two savings bank accounts. Here’s a quick description of each:
- A monthly service fee of $10. This can be waived if you maintain a minimum balance of $1,000.
- You can make 15 monthly deposits at no charge
- APY is only 0.01%
- A monthly service fee of $20. This can be waived if you maintain a minimum balance of $25,000.
- You can make 30 monthly deposits at no charge
- Even in this account, the APY is 0.01%
Both give you access to 16,000 ATMs and nearly 4,900 branches.
4. Wells Fargo
Wells Fargo Bank has its headquarters in San Francisco. It is the fourth-largest bank in the United States.
You have a choice of two savings bank accounts:
- Minimum opening deposit requirement of only $25.
- Relatively low APY of 0.03%.
- There’s a $6 monthly service fee as well. However, you can avoid paying this if your average balance exceeds $500.
- Deposits into this account attract a higher APY of 0.10%.
- You need to maintain a minimum daily balance of at least $10,000. If you don’t, you’ll have to pay a monthly service fee of $15.
5. Bank of America
Bank of America is another heavyweight. It’s the second-largest bank in the United States.
Smaller businesses with a lower amount of extra cash could opt for Bank of America’s Business Investment Account.
- You need only $100 to open an account.
- The APY is low at 0.02%.
- You should maintain a minimum daily balance of at least $2,500. If you don’t do this, you could be liable to pay a monthly fee of $5.
As you can see, there is a wide range of options available when you want to open a savings bank account. Carry out your research carefully before you make a choice.
One precaution that you must take is to verify that the FDIC protects your deposits.
At Camino Financial, our objective is to provide you with the resources you need to run your business more efficiently and profitably. Our motto, “No business left behind,” drives us to collect information that could be of use to you.
If you don’t have a savings account and you need money for your business, maybe you should consider a small business loan.
With Camino Financial, you can get an instant loan quote by providing us with some basic information. If your loan is approved, we can transfer funds directly into your account in a matter of days.