Interest-bearing accounts help your business make passive income off of financial reserves. Though they offer lower yields than investments, they are far more reliable and come with no risk of loss. If you have reserve funds in a bank, then these accounts can enable your money to grow and help you meet your savings goals.
The list below lists the eight best ways to earn interest for your business.
1. Open an Interest-bearing Business Checking Account
Today’s best small business checking accounts offer the option to earn interest on your account balance. With traditional brick-and-mortar banks, these interest-earning accounts are usually not the lowest-tier account. Interest-earning accounts from traditional banks typically charge monthly account maintenance fees, although most can be waived by meeting specific activity requirements.
If you want to earn interest on your checking balances without paying monthly fees, digital-only providers tend to offer more affordable options. Many digital providers offer interest-bearing business checking accounts. However, many of these accounts either put a cap on interest-earning balances or have tiered interest rates that decrease as balances increase.
Bluevine leads the way with interest-bearing checking accounts, providing an annual percentage yield (APY) of 1.5% on qualifying balances up to $250,000 for Standard plan customers while offering 4.25% APY on balances up to $3 million for Premier plan customers. Read our review of Bluevine business checking to learn about its features, or head over to Bluevine’s website to open an account.
| Pros of Interest-bearing Business Checking Accounts | Cons of Interest-bearing Business Checking Accounts |
|---|---|
| Great way to earn money on your primary business checking account | Can have limits on how much money you can earn interest on |
| Many offer no transaction limits or at least higher transaction limits than savings accounts | Can be hard to find business checking accounts that offer a good APY rate |
2. Open an Interest-bearing Business Savings Account
While interest-bearing potential is not a common feature for entry-level business checking accounts, interest-bearing business savings accounts are standard across most financial institutions. However, you can usually find the best interest rates with online-only providers, which have high-yield savings accounts that earn interest at rates up to 25 times the national average.
Savings accounts usually have fewer high-end limits on balances that earn interest, although some have tiered accounts that offer higher APY based on the balance amount. One big downside to business savings accounts is that they limit your access to your money. Many business savings accounts are still limited to six monthly withdrawals and transfers and charge steep fees for excess transactions.
If you’re looking for an interest-bearing savings account, Live Oak Bank is a great choice. It offers 3.80% The rate is valid as of Nov. 1, 2024, and subject to change at any time. APY on its savings account and has no monthly maintenance fees or minimum opening deposit requirements. You may want to check out our Live Oak Bank business savings review for more detailed information, or to open a savings account, visit Live Oak Bank’s website.
| Pros of Interest-bearing Business Savings Accounts | Cons of Interest-bearing Business Savings Accounts |
|---|---|
| Can earn more money than with interest-bearing checking as APYs are usually much higher without balance cap | Has a limited number of free transactions; fees for going over transaction limits can be very high |
| Allow you to have an account to save for large expenses, such as tax bills or financial emergencies | Has monthly fees for some accounts, which might be higher than the amount of interest earned |
3. Open a Business CD
Among the best ways to earn interest for your business is through a certificate of deposit (CD). A CD is a type of savings account that provides higher-yield interest rates at the cost of limited account accessibility.
When you deposit money into a CD, you agree to leave it untouched for a fixed period. This means that you cannot withdraw or make additional deposits into a CD within the agreed-upon term, and if you need to terminate before your maturity date, there are often financial penalties.
If your business has reserves that are unneeded for upcoming expenses, CDs are a great way for those reserves to earn you money. Some CDs have rates of more than 3%, and most CDs will increase interest rates on longer terms and larger balances.
If you want to invest in CDs, Live Oak Bank is a great provider. The bank has some of the highest rates on six-month and one-year CDs, which allow you to earn more right away, giving you more to invest later. More information can be found on the provider’s website.
| PROS | CONS |
|---|---|
| Often earn higher interest rates than interest-bearing checking and savings accounts | Don’t allow you to make regular transactions (deposits and withdrawals) |
| Allow you to take reserve funds not earmarked for upcoming expenses and earn money on them | Most banks charge a financial penalty for withdrawing early from a CD, which can include some or all of the earned interest |
4. Use the CD Laddering Technique
If you want to take advantage of CD interest rates without sacrificing fund accessibility, it’s best to use the CD laddering technique. This is the process of taking out multiple CDs with multiple term lengths.
Let’s say you have $15,000 in excess funds. Instead of storing the entire lump sum into a three-year CD, you can deposit $5,000 into a one-year CD, another $5,000 into a two-year CD, and another $5,000 into a five-year CD. This way, you will have access to your savings each year. If one term ends and you still don’t need to use your savings, you can keep reinvesting your funds.
This is a great technique in a rising-rate market as money reinvested from a matured CD will likely be going into a new CD at a higher rate. However, this can be less lucrative in a rate-declining market because each matured CD will be rolled over into a new CD with a lower rate.
If you want to start a CD ladder, Live Oak Bank is an excellent provider. It offers rates of 3.00% The rate is valid as of 5/1/2024 and subject to change at any time. APY on three-month CDs and 5.00% APY on 12-month CDs. For more information, visit the company’s website.
| Pros of CD Ladders | Cons of CD Ladders |
|---|---|
| Keep more of your financial reserves liquid with CDs regularly expiring, giving you access to your funds | While funds become available more often than with one CD, they are still tied up and can’t be withdrawn early without penalty |
| Can earn larger amounts of money in a rate-rising environment as each maturing CD can be reinvested at a higher rate | Earnings can stagnate in a rate-decreasing environment as each maturing CD would be reinvested at a lower rate |
5. Open a Business Money Market Account
Similar to a business savings account, a business money market account (MMA) allows you to deposit funds into an interest-bearing account. As with a savings account, there are limits to the number of free withdrawals and transfers you can make each month. However, unlike savings accounts, you get unlimited deposits.
Many business MMAs charge monthly fees, although they often can be waived by meeting certain activity requirements. In the past, you could expect to earn higher interest rates with a money market account vs savings account, but this is no longer always the case, so be sure to shop around to get the best rates.
U.S. Bank Member FDIC. is an outstanding choice with its promotional APY rate for its Platinum business MMAs. You can earn interest at a rate of up to 3.50% Opening a new U.S. Bank Platinum Business Money Market account until December 20, 2024, entitles you to a 3.50% bonus interest rate if your account balance ranges from $25,000 to $2,999,999.99. Both bonus and standard rates may change at any time without prior notice and may vary depending on your location. Terms and limitations apply. Member FDIC. . To learn more, visit U.S. Bank’s website.
| Pros of Money Market Accounts | Cons of Money Market Accounts |
|---|---|
| Lets you earn high rates of interest while still giving you access to your funds | Limited number of free transactions; fees for going over limits can be very high |
| Often earns higher interest rates than traditional savings accounts, although that can vary among financial institutions | Some money market accounts come with monthly fees, which might be higher than the amount of interest earned |
6. Look for Higher-yield Introductory APY Rates
If you can’t meet the requirements to earn interest on high-yield checking and savings accounts, you might be able to find an account that offers a higher APY as an introductory bonus. This is one of the best ways to earn interest for your business. Usually, the APY will be considerably higher than normal for a set period after opening the account. Once the period is over, the rate will lower to whatever the account’s standard APY is.
While not as ideal as an account with a rate that stays high, choosing an account with promotional APY rates and increasing earnings during the introductory period are better than settling for an account with a very low APY. Once the introductory period is over, you can keep the account if the regular APY rate is decent. If the regular APY is too low, the savings you’ve built can help you qualify for a higher-interest account at another financial institution.
Capital One is one provider that offers an introductory rate on its business savings accounts. You earn interest at a promotional APY rate for the first 12 months, and at the end of the period, the rate returns to the standard variable APY rate. To open a Capital One business account, visit a branch in Delaware, Louisiana, Maryland, New Jersey, New York, Texas, Virginia, or Washington, D.C. More information is available on the company’s website.
| PROS | CONS |
|---|---|
| Great way to earn a higher interest rate on a new account, especially if you can’t qualify for higher-yield bank accounts | Rate is for a limited time, and permanent rate is often very low compared to other interest-bearing accounts |
| Allow you to build a business banking relationship with a new bank, which might help when needing other business products | Intro rates on some accounts are much lower than standard rates on other accounts |
7. Look for Tiered APY
Many providers reward users with larger savings by offering tiered interest rates that increase with higher balances. For example, a bank might offer 0.50% interest on balances up to $50,000, 0.75% on balances from $50,000 to $499,999.99, and 1.00% on balances of $500,000 and over.
One advantage of the tiered APY system is that it incentivizes building your savings fund. If you intend to grow your reserve funds, choosing business savings accounts with tiered APY can be a great way to increase your earning potential.
Prime Alliance Bank offers excellent tiered interest options. Interest rates range from 3.78% The rate is subject to change at any time. for balances less than $100,000 to 4.16% for balances of $200,000 and above. It has no monthly maintenance fees or minimum balance requirements but has a limit of six withdrawals and transfers each month. Read our Prime Alliance Bank business savings review to discover if it’s a good fit for you, or visit Prime Alliance Bank’s website to learn more.
8. Open an Account With Your Local Credit Union
When comparing interest rates of traditional banks vs local credit unions, the credit union will almost always offer higher APY and tend to charge lower monthly fees. Traditionally, credit unions only offered their services to members of partner communities or organizations, but today, most of the best small business credit unions allow applicants to acquire membership by paying small one-time donation fees.
However, there are some potential drawbacks to credit unions. While they offer higher rates than traditional banks, they might be unable to beat the rates of online-only banks, so shop around to determine the best rates.
For a credit union with interest-bearing accounts, Affinity Plus Federal Credit Union is a good choice. It has interest-earning checking and savings accounts and other lending and financial products. Membership is open to everyone, but businesses outside the Affinity Plus FCU service area must pay a small donation fee. Check out its website for details.
If you’re considering opening a checking account, you may be interested in reading our Affinity Plus FCU business checking review to learn more about the account’s features and requirements. You may also visit Affinity Plus Federal Credit Union’s website for more information.
| PROS | CONS |
|---|---|
| Usually will earn higher interest rates than a traditional, brick-and-mortar bank. | Rates may not be higher than online banks. |
| Usually offer a full-service banking experience with business products to help your business grow. | Membership may be limited to a workplace or geographic requirement and may not be open to everyone. |
How To Know Which Techniques Are Right for You
Although any of the account types and techniques listed above can help you make money, typically, the best savings strategy is to select the account or technique that earns your business the most money at the lowest cost. However, it’s also important to consider factors like interest caps, fund accessibility, and transaction limits, which may affect your banking experience.
To determine which best suits your business, consider the following questions:
- How much money will be earning interest?: Some accounts have a cap on how much money can earn interest, and others have different rates for different amounts of money.
- How liquid do I need the funds to be?: If you have reserves you won’t need to touch for months or years, you can opt for a CD, which charges fees for early withdrawals but offers higher interest rates. If you need to access funds frequently, you might need a checking or traditional savings account.
- How many transactions will I need?: Checking accounts offer practically unlimited transactions. However, savings accounts charge high fees after six withdrawals or transfers, whereas CDs don’t allow transactions without penalty.
Frequently Asked Questions (FAQs)
There are several ways to earn interest for your business reserves. However, you must first assess your liquidity needs, frequency of transactions, and preferred interest rates before choosing the best option of earning interest for your excess funds.
Interest rates are subject to change, so it is hard to make high-interest predictions. There are various investment types available, such as real estate and stock market investment vehicles, to help you meet your financial goal. However, with bigger returns, bigger risks are also involved. MMAs, CDs, and high-yield savings accounts offer high interest with relatively low risks, but these accounts do not typically yield 10% in any given year.
Saving up for an emergency fund should be a priority. And, if you’re paying high interest for your business loans, it is advisable to create a plan to pay off the debt before placing your money in various business banking products to grow your savings.
Bottom Line
Having an interest-bearing account helps your business earn money passively from its reserves. All the options we listed can help your money work for you, but each has specific times when they will work best for your business. Consider which fits your business needs best and open an account that allows you to earn interest with the level of money access you need.
