The route to financial success begins by selecting the right deposit account for your business. Unfortunately, this critical decision is not always easy. Since banks offer a wide variety of deposit products and services, the decision can quickly become overwhelming. Understand the differences between transaction, savings and time deposit accounts by getting a full explanation on each of the account options below.
A transaction account, also known as a demand deposit account, is for money that goes in and out quickly. The intention is that funds deposited will soon be withdrawn to pay bills and meet expenses – that is, engage in transactions. A checking account is the most common example of a transaction account, but ICB has several different options for businesses that fall under the “checking account” umbrella.
- Advanced Business Checking is for high activity accounts. This type of account can typically be customized to meet your business needs. From basic checking services to cash management services, wire transfers, online banking, automatic sweeps, origination of ACH files and more, this product is flexible and customizable. At ICB, an analyzed account receives an earnings credit for the balance in the checking account. All transactions and services are charged to your business, but the earnings credit significantly offsets these fees. Depending on the balance in the checking account, this can mean greatly reduced fees or no fees at all. An analyzed business checking accounts may work best for a growing company that has a higher volume of transactions, keeps a high balance and uses several cash management services such as ACH origination.
- Accelerated Business Checking is for medium activity accounts. Monthly maintenance fees can be avoided by keeping a specific minimum daily balance, but allows for unlimited transactions. The advanced business checking may be a good option for an established business that keeps a high collected balance, as it yields a competitive interest rate.
- Essential Business Checking is for lower activity accounts. This account is simple and easy to understand that fits a variety of business needs. Like the advanced business checking account, maintenance fees can be avoided by keeping a specific minimum monthly balance within the account. A basic business checking account may be best suited for a business with a limited number of monthly transactions or could be a secondary account used for a particular purpose, such as a property-holding account.
- Nonprofit Checking is designed for organizations dedicated to making a difference in their communities. The nonprofit checking account has no monthly maintenance fee, no minimum balance requirement and allows for unlimited transactions. Nonprofits also qualify for discounted rates on various treasury management tools. Lastly, organizations who maintain a high collected balance earn a competitive interest rate. This account is simple and allows for nonprofit organizations to retain the money they have raised for their causes.
A savings account differs from demand deposit transaction accounts because, technically, they cannot be withdrawn on demand. A bank can require a seven-day notice of withdrawal from a savings or money market account, though, in reality, very few do. Federal regulations limit certain types of transfers and withdrawals to six per month, unlike transaction accounts. Deposits and withdrawals can be made on any day, and have no maturity date.
Interest rates on basic savings accounts are typically very low compared to money market and certificate of deposit accounts. Money market accounts generally pay more in interest because they require a higher minimum balance than basic savings accounts. A savings or money market account is best used for cash you’d like set aside, but can still be accessed, if necessary.
Time Deposit Accounts
A time deposits is an interest-bearing account with a specific maturity date. The most commonly known type of time deposit account is the certificates of deposit. CD terms can range from one month to five years, and interest rates typically increase with longer terms. Early withdrawals from certificates of deposit generally result in penalty fees. Time deposit accounts are intended for cash which you’d like to earn interest on that will not be needed until the term ends.
Your business banker or cash management specialist is your best asset when it comes to finding the best account deposit for your business. At ICB, we like to focus on what banking customers care about most – convenience, custom solutions and ease of use. We can design a deposit account, including any add-ons like ACH origination, remote/mobile deposit and fraud protection. There is no one-size-fits-all approach to business deposit products, so we can help you find a solution that best suits your specific needs.
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