When it comes to choosing the right deposit account for your business, the options can seem overwhelming, as banks offer a wide variety of deposit products and services. This blog will help you understand the options by explaining the differences between transaction, savings and time deposit accounts.
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 The intention is that funds deposited will soon be withdrawn to pay bills and meet expenses – that is, engage in transactions.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 there are different options for businesses that fall under the “checking account” umbrella.
An analyzed business checking account (ICB 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 Investors Community Bank, an analyzed account earns an earnings credit for the balance in the checking account. Your business is charged for all transactions and services, but the earnings credit offsets these fees. Depending on the balance in the checking account, this can mean greatly reduced fees or no fees at all. This type of account may work best for a growing business that has a higher volume of transactions, keeps a higher balance and uses several cash management services such as ACH origination.
A basic business checking account (ICB Essential Business Checking) is for lower-activity accounts. This is a simple, easy-to-understand account that fits a variety of business needs. Monthly maintenance fees can be avoided by keeping a specific minimum monthly balance. This type of checking account may be best suited for a business that has a limited number of monthly transactions, or could be a secondary account used for a special purpose, such as a property-holding account.
Savings accounts differ from demand deposit transaction accounts because, technically, they cannot be withdrawn on demand.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. Unlike transaction accounts, certain types of transfers and withdrawals are limited to six per month according to federal regulations. Savings accounts, like checking accounts, have no maturity date. Deposits and withdrawals can be made on any day. 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 a basic savings account. A savings or money market account is best used for cash you’d like set aside, but can still be accessed at any time.
Time deposit accounts
Time deposit accounts, such as certificates of deposit (CD), have specific maturity dates. They are typically available with terms from one month to five years, and the interest rate increases the longer term you choose. When a time deposit is withdrawn before maturity, a penalty is usually imposed. Time deposit accounts are intended for cash that 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 working through what types of accounts are best for your business. Reach out to Investors Community Bank for expert guidance; we can design a deposit account, including any add-ons like ACH origination, remote/mobile deposit and fraud protection to fit your specific needs, keeping in mind what our customers care about most – convenience, custom solutions and ease of use.
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