Owning a business can be tough, especially when it comes to managing finances. There are many different ways a business can do so. One of the best ways is to open a business savings account. This will help you track your finances better, and earn more money if you find an account with a good rate of interest.
Best Business Savings Accounts
Let’s take a look at two of the best banks that offer a business savings account in Canada, Scotiabank and their subsidiary Tangerine Bank.
Scotiabank Business Savings Account
Starting off our list is Scotiabank’s business savings account, the Right Size Savings for Business. This is a great savings account for businesses, as it is cheap to use. There is also good earning potential with the interest rate Scotiabank offers.
This account has no monthly maintenance fee, and self-service transfers are free and unlimited. You don’t want to pay fees to access your own money, and you won’t have to with this account. Similarly, Scotiabank encourages you to save. You can earn higher interest rates the higher your balance is. You want cash back in your pocket, not the banks. If that isn’t enough, here are some more advantages to the Scotiabank business savings account.
- You can earn an interest rate of 0.2% if you have between $10,000 and $99,999 in your account. The interest rate increases to 0.65% If you have over $1,000,000.
- You can withdraw funds anytime for free.
- Online banking is available.
- There is no monthly fee to maintain the account.
- You can pair your business account with your personal account, or your credit card if you want to.
- Self-service Candian dollar transfers are unlimited and free.
- Interest rates are lower than other savings accounts, especially if you have less than $99,000 on deposit.
- A maximum account balance of $2,000,000 may be an issue for bigger businesses.
- The minimum balance to receive interest is $10,000.
Tangerine Business Savings Account
Next, we’re going to take a look at one of Canada’s favourite online banks (other than EQ Bank), Tangerine. Tangerine is known for offering a great interest rate, and they do not disappoint with this business savings account. You can earn an interest rate of up to 0.55% if you have $500,000 or more in your savings account.
Banking with Tangerine is also beneficial as they have little to no fees. There are no monthly account fees and no minimum balance needed, so you won’t be losing money in an attempt to save it.
You can also pair your Tangerine savings account with your credit cards or other accounts for easy banking. Even though Tangerine is an online bank, there are plenty of pros to utilizing their business accounts.
- No maximum or minimum balance.
- Interest is slightly higher than other business accounts. If you have less than $99,999 you will get an interest rate of 0.3%. Below $499,999 will get an interest rate of 0.5%. Anything above $500,000 will get an interest rate of 0.55%.
- No monthly account fee to maintain the savings account.
- Tangerine doesn’t believe in unfair fees, so you can save even more.
- Tangerine is one of the best online banks (along with EQ Bank) in Canada and is owned by Scotiabank.
- You must have a chequing account at another bank to open a business savings account with Tangerine.
- Not much difference in the interest rate between the second and third-tier.
What is a Business Savings Account?
As it sounds, a business savings account is an account that business owners can use to store business savings. It is not intended for everyday use; rather, it is used to receive interest while paying minimal fees. If a business needs to make everyday transactions, a business chequing account or credit card is a better option.
A business savings account typically needs to be paired with a chequing account or credit card. This is because you typically can’t use a savings account to make transactions. But, you can make transfers to your chequing account or pay bills for credit cards or your business with it. There are a number of situations where it’s beneficial to take advantage of savings than take a business loan. To get the hang of it, make sure to read the business loan FAQs.
What are the Differences Between Personal and Business Savings Accounts?
The main draw of a personal savings account is the interest you can earn. Banks typically offer higher interest rates with savings accounts to encourage customers to store their money in the account long-term. Business savings accounts do also offer interest, but the rates tend to be lower compared to personal savings accounts.
Business savings accounts can also typically be accessed by multiple people. If your business has more than one person in charge of finances, each person can access the account. A personal account can only be used by the person whose name it’s in unless it’s joint.
A business account tends to have more fees than personal savings accounts do. The two banks we discussed don’t charge many fees for their business account, but some banks might.
Are Business Savings Accounts Insured?
In Canada, the Canadian Deposit Insurance Corporation insures deposits up to $100,000 to banks that are a member. This means all of your chequing accounts and savings accounts are covered if the bank you are with is a member of the CDIC. Most banks in Canada are members.
That being said, only a total of $100,000 per entity will be insured. This means if you are a sole proprietor, your business income will count towards your $100,000 coverage. So, incorporating your business may be the best idea in this case. This way, you get the best of both worlds as a $100,000 of your own money will be insured as well as $100,000 of your business funds.
Why Open a Business Savings Account?
Opening a savings account for your business is one of the best things you can do. If you have money that is not necessary for daily operations, why not save it?
Obvioulsy, not every business is able to save money. If you are looking at getting a business start-up loan, then perhaps you’re not in a position to be exploring savings accounts for your business.
However, If you find a bank that offers good rates of interest, you will be passively earning cashback on top of your income. Passive income is one of the best ways to make extra money. Especially in this case, as there is no risk in putting your money into a savings account.
Having a savings account for your business is also the best way to budget and see what you can afford. Do you need new equipment, new staff or renovations? Check your account to see if you can afford it.
The Bottom Line
Whether it’s for your business or for yourself, a savings account is the best option for saving money. Your business income could be earning even more money in savings accounts if the bank offers a good rate of interest.
There’s nothing to lose when opening a savings account, especially when the CDIC insures up to $100,000 of your deposits. Choose the best path for your business and open your business savings account today!