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Lower rates for business savings accounts?


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An account for business depositors usually gives a lower return than a private savings account. To still obtain a good rate, depositors have to put in some extra effort.

The reason that business savers have a disadvantage over individuals is that savers are willing to open a savings account with a bank when it offers a higher interest rate than competitors. But if the interest rate turns sour, business savers quickly move their money somewhere else. Many companies actively manage excess cash.

For individual savers that may be different. They have other things on their minds and do not always have the appetite for chasing the best rates. Once the account is opened, the majority remains loyal even when other banks come up with better rates. Many banks take advantage of this inertia by introducing new deposit accounts with promotional rates while gradually decreasing the rates on existing accounts.

If you manage a company with lots of cash surpluses like for example a pension vehicle, pension vehicle or personal trust, it is less difficult. Some savings banks offer the same interest rates as for private accounts for these vehicles since they are normally run by private individuals instead of companies.

The most convenient solution is to open a savings account with the same bank where you have your current account. In that way you can make transfers between your own accounts with the same online application. To benefit from an attractive interest rate, it is better however to shop around a little. While rates are lower for business customers than for private clients, they usually fluctuate less. Niche banks like ING Direct normally offer higher rates than regular banks. The latter leverage their checking account holders who stay with them for reasons mentioned before.

You have the peace of mind that your cash is insured by the FDIC for amounts of up to 250,000 dollar. If your cash surplus is above that limit it is wise to distribute your deposits over several banks as the Federal Deposit Insurance Corporation (FDIC) limit applies to individual savings banks (not to branches of the same bank). In addition, it always makes sense to deposit your savings with a solid bank. Although unthinkable a few years ago, a guarantee from the US (or any government) is not a hundred percent protection anymore.

Once you have chosen an account prepare for some forms to be filled out. Normally the initial step can be taken online but some paper forms can't always be avoided and copies of business and personal documents are needed as well. Naturally, if the bank you selected has a branch near where you live, you may always go there for personal help. Some of the best rates however can only be obtained via the internet.

In these times of low interest rates, you can only obtain an attractive rate if you actively look for a high interest deposit accounts. Common sense and Google are your best companions.

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