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Having idle business cash could be a missed opportunity. Money sitting in a low- or no-interest checking account could be losing value to inflation, while a high-yield business savings account could put reserve funds to work.
Opening a high-yield business savings account may help you better manage funds set aside for emergencies or long-term goals, while keeping available funds for regular operations in a business checking account. Here are some reasons to consider opening a business savings account and how to choose an account for your enterprise.
Key Takeaways:
- A high-yield business savings account may help a business earn interest.
- High-yield business savings accounts may be paired with a business checking account, allowing you to keep separate funds for emergencies or long-term goals from funds for regular operations.
What Is a High-Yield Business Savings Account?
A high-yield business savings account, or business HYSA, is a deposit account for businesses that may pay a higher annual percentage yield (APY) than a traditional checking account. It may be meant for reserve cash, not daily spending, and the rates may vary, depending on the institution and other factors, like the amount deposited.
Do Businesses Need a Savings Account?
Businesses may not be required to have a savings account but it may be something worth considering, depending on the type and stage of your business.
Some businesses run day-to-day funds through a checking account, but may want to consider putting into a savings account reserve funds earmarked for planned expenses and emergencies. A high-yield savings account may allow you to earn while the money is being held.
Business Savings vs. Business Checking
A high-yield business savings account may store extra cash and may offer a higher APY, but may have less money movement functionality available. A business checking account may be meant for day-to-day spending, including paying bills, processing payments, running payroll, and using debit cards.
The two types of accounts may work in tandem, with the funds in a business checking account available for regular expenses and purchases. A savings account may earn interest on the cash you have set aside for business emergencies and major purchases. It also may help facilitate budgeting and financial analysis.
Benefits of a High-Yield Business Savings Account
There are many potential benefits of high-yield business savings accounts, including the ability to:
- Earn interest on idle cash: A high-yield business savings account may allow you to grow your money, potentially helping to offset inflation.
- Build an emergency fund: A business savings account could provide a cash cushion for unplanned expenses or a disruption to your operations.
- Keep reserves separate from operating funds: A savings account may help with accounting and small business budgeting, allowing you to better manage funds for everyday activities and future uses.
How to Choose a High-Yield Business Savings Account
There are multiple factors to consider when choosing a high-yield business savings account, including:
- Interest rates and rate tiers
- Monthly fees
- Minimum open deposit
- Minimum balance to earn the top rate
- Transaction limits
- Integrations with accounting and checking
- Customer support
How to Open a Business Savings Account
You may not need an initial deposit to open a high-yield business savings account. However, you may want to consider automating monthly transfers from your business checking account as a way to increase your balance.
Banks could require the following to open a business savings account:
- Your Employer Identification Number (EIN) or a Social Security number for sole proprietors
- Business formation documents
- A business license (if you have one)
- Personal identification (such as a driver’s license)
- An initial deposit
The Takeaway
You work hard. Your money could work for you, too. A high-yield business savings account could offer a way to make extra cash work harder while keeping your reserves accessible.
High-Yield Business Savings Account FAQs
Do businesses need a savings account?
Businesses may not need a savings account but may find them helpful to use as an emergency fund, to keep funds separate, or to earn interest on excess revenue.
Is a high-yield business savings account worth it?
A high-yield business savings account may be worth having, depending on the interest rate and how long you intend to maintain the funds in the account.
How much should a business keep in a savings account?
The amount a business may choose to keep in a savings account may vary, depending on factors like the stage of your business and type of business. A financial professional could help determine the appropriate reserve for your business.
What do you need to open a business savings account?
You may need personal identification, an Employer Identification Number (EIN), business formation and legal documents, a business license, and possibly an initial deposit to open a business savings account.
Can an LLC open a high-yield business savings account?
An LLC may be able to open a high-yield business savings account.
Consider American Express® Business Banking
Move money when you need it— scheduled or same day between Amex® Business Checking and Amex® Business Savings.
Learn more about American Express® Business Banking.
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