Can Business Bank Accounts Earn Interest?

Rates

Banks often offer teaser or introductory interest rates for new customers. Typically, these accounts earn a higher rate of interest for the first several months and then drop down to a standard interest rate. Take advantage of promotional interest rates to earn the best return on a business bank account. Keep in mind that some banks adjust interest rates periodically. Check the bank policy on how the account interest rate may change or fluctuate.

Banks accrue compound interest at varying intervals. The most common methods of calculating interest payments are via monthly and annual compounding. Some banks offer daily interest accrual for business accounts, and a few offer a weekly interest calculation option. While the difference may seem small, choosing an account that compounds interest more frequently usually results in a higher rate of return. The bank usually will have a handout with a detailed explanation on how the institution determines interest rate earnings.

Many banks offer the option of money market accounts for businesses in lieu of holding cash. Money market accounts often feature a higher rate of return than the standard business checking options, and the assets can usually be liquidated within one business day. Most checking accounts offer the option of money market investments to clients who meet minimum account balance requirements. Check to see if the bank will waive fees on money market accounts and the policy on FDIC insurance.

Interest bearing checking accounts often come hand in hand with bank fees. Make sure the monthly fees on the account won't be more than the interest earned on the assets. For smaller businesses, it can be prudent to opt for commercial bank accounts with lower fees rather than a higher rate of interest. An interest bearing account is only profitable when the earned interest is higher than the bank fees charged to the account.