Business Checking Account Vs. Business Saving Account

Having a dedicated business bank account can be incredibly beneficial for your company, with in the present and in the future. It allows you to separate professional and personal funds and gives you potential access to things like business loans, business lines of credit and more.

But, just like with ordinary bank accounts, there’s more than one option when it comes to the type of business bank account you open. Namely, a checking account and a savings account.

These types of accounts offer users different services, from varying limits to different interest rates.

So, for businesses who have decided that they want to open a business bank account, it’s essential that they consider what these two types of accounts have to offer and what will best serve their needs.

The Difference: At a Glance

The most basic and straightforward way to describe the difference between a business checking account and a business savings account is that the former is intended for daily use while the latter is supposed to be for more long-term savings.

So, a checking account is supposed to be used for day-to-day transactions like paying bills and receiving small payments, while a savings account is where a business would store the money it doesn’t currently need.

Comparing Business Checking Accounts and Savings Accounts

The best way to properly understand the difference between these two types of bank accounts is to compare them side by side, looking at the services they provide and everything that they have to offer.

The Ins And Outs of a Business Checking Account

A business checking account is the best starting point for companies who are just transitioning from using a personal account to an official business account. It allows a company to manage day-to-day transactions.

The most important features of a business checking account are:

• Handling frequent transactions like paying bills, managing payroll and sorting out general operational expenses.

• Either unlimited or high limits of transaction numbers, allowing for loads of payments and withdrawals without penalties.

• Generally no interest is offered on account balances.

• Immediate access to funds, normally along with being able to write checks and use debit cards.

• Checking accounts often have high minimum balance requirements.

• Fees tend to be a little bit higher.

• Normally offers unlimited transactions, wire transfers and overdraft protection.

• Easy integration with daily operations like handling payroll, paying vendors, managing merchant services and more.

• Includes debit card access and check-writing capabilities for convenient spending.

• Great online banking services including features that allow users to make and monitor frequent payments and transfers from anywhere, at any time.

What Exactly is a Business Savings Account?

Now, a business savings account, on the other hand, is very different in terms of what it offers and all the features that come with it.

The most important features of a business savings account include:

• Intended to be used to safely store extra funds that aren’t needed for daily operations while earning interest on the lump sum.

• Normally includes limits on the number of transactions you’re allowed to make, and if these limits are exceeded, the business will face penalties which are often fines.

• Money earns interest while it sits, so putting extra funds you don’t need access to into a savings account allows the money to grow passively.

• Funds are normally accessible, but frequent access is discouraged due to transaction limits. In some cases, notice is required before funds can be accessed and withdrawn.

• Normally no access to check writing or debit cards.

• Overdraft protection isn’t normally included as the funds aren’t supposed to be used for frequent spending or withdrawals.

• Fees and maintenance costs tend to be lower than with checking accounts, however there may be minimum balance requirements and, of course, penalties for exceeding transaction limits.

• Not ideal from a cash flow management point of view as the account is intended to simply hold cash rather than facilitate lots of activity.

• Mobile and online banking are available, but normally for basic use like checking balances.

• Normally linked to a business checking account to be able to move funds from daily operations to savings.

Checking, Savings or Both?

When it comes to looking at business checking accounts and business savings accounts, the comparison is absolutely necessary. These two accounts offer completely different services and features, making them ideal for different people and business in varying contexts and situations.

But, that doesn’t mean that companies need to choose between them.

Just like with personal finances, it’s actually recommended that companies have both a business checking account and a business savings account.

Of course, for small businesses that are just starting out and are just trying to manage the day-to-day, this may not be necessary from the get-go. However, as soon as your company gets to the point where it has extra funds that aren’t needed for regular use, it’s probably time to open a savings account.

Ideally, your company will get to the point where it is actively using both a business checking and a business savings account, and you can feed money from the former into the latter.