A business savings account allows you to earn interest on your business funds when you’re not using them. These accounts are like standard savings accounts, except they’re designed for business use instead of personal use.
Here are five things to look for when you’re comparing business savings accounts.
A competitive interest rate
This is arguably the number one thing to look for in a business savings account. The higher the interest rate, the more interest you’ll earn on your money. And who doesn’t love earning money? Some accounts will offer a higher introductory interest rate for the first four to six months after opening the account, which could be a good option for short-term savings goals.
As an added tip, look for an account that has interest compounded daily, rather than weekly or monthly. This allows you to earn even more interest on your interest.
A low minimum balance requirement
Business savings accounts often only pay interest on balances over a certain amount, so make sure you choose an account with a realistic minimum balance requirement. For example, some accounts will only pay interest on balances of $10,000 or more, while others have lower or even no minimum balance requirements to meet.
You might also come across some accounts that offer tiered interest rates, meaning the higher your balance, the more interest you stand to earn. These are good options for businesses with higher savings balances.
No or minimal transaction restrictions
Running a business often comes with unexpected expenses, so it’s important that you have quick, easy access to your savings and that you’re not penalised for making withdrawals. Some business savings accounts offer unlimited transactions, while some have a limit of say five transactions a month. If you exceed the transaction limit you won’t earn any interest for that month, or you might even be charged a fee.
On the other hand, the accounts with stricter withdrawal conditions do usually offer a higher rate of interest in return. So if you’re confident that you won’t need to withdraw from the account too often, it could be worth choosing an account with more transaction restrictions and a higher interest rate.
No account keeping fees
It’s uncommon for business savings accounts to charge account keeping fees, however, some business transaction accounts do. Because you’ll likely need to link your business savings account to a transaction account provided by the same bank, you need to check that the transaction account charges no monthly fees either. This leads to my last point, about choosing a linked transaction account.
A great linked transaction account
Most business savings accounts will need to be linked to a business transaction account. This is because savings accounts don’t typically come with a debit card, so in order to access your money, you’ll need to move it your transaction account first. Therefore, you need to consider the transaction account as well, not just the savings account.
Look for a business transaction account with free ATM withdrawals, low (or no) foreign exchange fees and the ability to have overseas ATM withdrawal fees waived. Some business transaction accounts also offer helpful budgeting and cash flow management tools.
A business savings account with a competitive interest rate will ensure that you’re earning money while you sleep. And, thanks to the beauty of compound interest, you can even earn interest on your interest. But always make sure you compare the linked business transaction account, too.
This guest post was written by Alison Banney, Senior Banking & Investment Writer at finder.com.au.
Remember, this article does not constitute financial advice - if you have questions about your business savings account, please consult a professional.
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