How can I find the best business bank account?
November 10, 2014
Q: Where can I find information on high-interest business accounts? All I see advertised are accounts for individuals.
A: To a large extent, the same interest rates advertised for individuals should be available for business accounts at those same institutions. Just don't expect to see much in the way of high interest these days. According to the FDIC, the average rate nationally is just 0.06 percent for savings accounts and 0.08 percent for money market accounts. Even the best rates these days are still around 1 percent.
The good news is that you might be able to leverage a business relationship into more favorable terms from a bank -- it's just that those better terms may not necessarily involve your interest rate. Here are some things to keep in mind as you search for the right bank for your business needs:
Do not expect a break on rates. You might expect that a business account is typically larger than the average personal account, so this size should entitle you to preferential savings or money market account rates. The problem is that banks really do not care much about large deposits these days. Jumbo accounts, which are deposits in excess of $100,000, receive no rate premium for savings accounts, and just 4 basis points extra for money market accounts. Banks are actually overloaded with deposits, and do not feel they need to offer higher interest rates to attract them.
Be especially careful about checking account fees. Since business banking tends to be transactional rather than passive, you may want to focus on the cost of your checking account needs rather than on savings account interest in choosing a bank. At today's low interest rates, checking account fees can easily exceed savings account interest.
Discuss your banking needs as a package. It is fairly easy for an individual to choose separate banks for savings and checking, depending on where the terms are better. Businesses often need closer coordination for cash flow management purposes. Banks are going to be most interested in revenue-generators like credit lines and payroll accounts, and discussing your business needs as a whole should improve your negotiating position.
Be sure to shop around before you choose. Just be aware that services, interest rates and costs vary greatly from bank to bank. Do not choose a bank without doing some comparison shopping.
In general, business accounts are more active than individual accounts. In choosing the right bank for your business needs, start by projecting what type of activity you expect your business accounts to generate. Then, choose a bank based on minimizing the cost of that activity, and on receiving the quality of service that will help you do business seamlessly.
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