Listen up business people, are you stressing about where to park your extra cash? Yeah, we hear you. With business savings accounts galore, it can feel like trying to find Waldo in a sea of look-alikes. So we did it for you. In this article, we break down what features to look for and where to find the best business savings accounts to grow your money faster than you can say “cha-ching!”
What’s the difference between a business chequing account and a business savings account?
A business chequing account is for day-to-day transactions like bills, payments, purchases, etc., while a business savings account is for setting aside extra cash you don’t need for regular expenses. Chequing accounts come with debit cards for daily transactions, while savings accounts earn much higher interest rates but are typically less accessible. Many businesses use both types to manage their finances effectively.
Why should I open a business savings account?
A business savings account is a great way to save money, plan for the future, and earn passive income on the extra cash you don’t need right now. Let’s break down some of the benefits:
Earn interest
You can make your extra cash work for you by earning interest on your business savings. That's free money, and who doesn't love that?
Be prepared
Whether you're saving up for new equipment or want to prepare for the unexpected, a business savings account can help you reach your goals faster and avoid taking on debt.
Grow your business
If you have a specific project or opportunity in mind, a business savings account is a great place to set aside funds to invest in your business. This could be anything from a marketing campaign to a new product launch or employee incentives to retain top talent.
Improve your creditworthiness
At some point you may need a great business credit card or a loan. A healthy business savings account balance will count towards your assets which can improve your creditworthiness in the eyes of lenders, making it easier to secure financing in the future.
If you're credit challenged, you can use the money in your savings account to get a secured business credit card and use it to build your credit history. When the time is right, you’ll be able to find the right business credit card for your needs.
How do I choose a business savings account?
Great! Now that you agree you need a business savings account, it’s time to pick one. Here are the top 5 things to look for:
1. Interest rates that will actually help your money grow
Who doesn't love free money? You want the highest rate possible with the least amount of hoops to jump through in order to get it.
2. No or low fees
Because every penny counts when you're running a business. Nothing kills your interest gains faster than paying to access and use your own damn money. So look for an account with minimal or no fees for maintenance, transactions, withdrawals, etc.
- Annual Fee : $0
- Interest rate on purchases : 19.99%
- Rewards Type : Cashback, Gas
- Cash Advance : 22.99%
- Balance Transfer : 22.99%
3. Easy accessibility & online or mobile banking
This one is easy because it's the 21st century, I can’t think of a single bank that doesn’t offer online banking. You should be able to manage your money from anywhere, anytime – ideally from the palm of your hand. Also, who even has time to go to the bank in person? But if you do, look for a bank with branches and ATMs that are convenient for you.
4. No or low minimum balance requirements
Check if the account requires a minimum balance to earn interest or avoid fees, you shouldn’t miss out for not having enough money saved. Not to mention, you work hard for that money so put it were it will be appreciated and treated best.
5. Additional features
Don’t rest on your laurels. Look for other perks that could benefit your business like sign-up bonuses, special credit card interest rates for account holders, free ATM access, and more.
The 5 best business savings accounts in Canada
Running a business is hard enough. So we did the leg work and found the 5 best business savings accounts to kickstart your search.
1. Manulife Business Advantage Account
Interest Rate: 2.85%
What’s Free: Deposits, Transfers, Pre-authorized payments
Ideal For: Small Businesses & Organizations
If you’re looking to stash your excess cash in a business savings account with a competitive rate, check out the Manulife Business Advantage Account (BAA). Right now, they're offering a solid 2.85% interest rate on deposits.
When it comes to making deposits, you've got plenty of options. You can transfer funds from another Canadian financial institution, deposit a cheque using mobile deposit, send an eTransfer, directly deposit income, mail a cheque to Manulife Bank, or visit any RBC Royal Bank branch in person. And the best part? There are no fees for any of these methods.
You can access your money instantly any time you need it. There are no fees to transfer money to another account or for pre-authorized payments. Other withdrawal methods will cost the following:
- Cheques: $1.50
- Bill payments: $1.00
- eTransfers: $1.00
This account is a great choice for a wide range of businesses, including small businesses, charities, associations, unions, and clubs. It also works well as a trust account, so if you're looking for a secure and accessible place to hold money in trust, the BAA is a good option.
2. Tangerine Business Savings Account
Interest Rate: Up to 2.90%
What’s Free: Most day-to-day transactions
Ideal For: Small Businesses & Organizations
One of Canada’s best digital banks offers a business savings account with up to 2.90% interest on deposits. However, to get this account, you need to have an existing business chequing account at another financial institution.
The Tangerine Business Savings account offers a tiered interest rate structure that ranges from 2.30% to 2.90%, depending on your account balance. There's no minimum balance, no monthly fee, and most day-to-day transactions are free too.
This account is best suited for businesses looking to grow their extra cash without having to pay for bells and whistles they don’t need. For a simple, accessible business savings account that can help you save and earn more on your extra cash, submit an enrollment request and Tangerine will contact you to finish setting up the account.
3. Scotiabank Right Size Savings for Business
Interest Rate: Up to 3.40%
What’s Free: Self-serve transfers between Scotia accounts
Ideal For: Larger businesses who want high interest & liquidity
Are you a larger business with a lot of extra cash on hand? Then check out the Scotiabank Right Size Savings for Business account. This one offers aggressive interest rates on deposits, but you need a minimum balance of $10,000 to start earning.
Interest rates are tiered, so the more you save, the higher your rate, which currently ranges from 3.25% to 3.40% depending on your account balance. Just be aware that there is a maximum account balance of $2,000,000. If you have more funds than that, you’ll need to speak to an advisor about other investment options.
Some of the standout benefits include no monthly account fees and you get free unlimited self-service transfers to and from your other Scotiabank accounts. Online banking gives you quick and easy access to your money, and you can withdraw funds anytime. There is a $5 fee applied to the following transactions:
- ATM withdrawals
- Direct payments
- Bill payments
- Other debits
This account is best suited for larger businesses with higher balances looking to earn exceptional interest without locking money up in less liquid products, like GICs for example. If that sounds like what you need, the Scotiabank Right Size Savings for Business account could be a great fit for you.
4. HSBC Business Savings Account
Interest Rate: Up to 5.25%
What’s Free: Transfers between HSBC accounts
Ideal For: Small businesses who don’t need their extra cash for regular expenses
If you're a small business owner in Canada with annual gross revenue below $5 million CAD, the HSBC Business Savings Account could be what you need. This account offers tiered interest rates ranging from 4.30% to 5.25% depending on your account balance.
Unfortunately, if you have a mind-blowing stack of cash on hand, there's no interest paid for balances greater than $30,000,000.00. On the upside, there's no monthly fee or minimum balance required to start earning interest, which is great news if you’re trying to maximize growth with a smaller nest egg.
Plus, you can easily transfer money between your HSBC accounts, making it a simple way to streamline your finances. Just be aware that there are a few fees associated with this account, such as:
- $0.20/cheque deposit
- $2.50/$1,000 deposited per month
Overall, this account is best suited for small businesses looking to accelerate their savings without needing to meet minimum balance requirements. And if you need any further proof, the HSBC Business Savings Account was recently named “Best Small Business Bank in Canada” by the Cosmopolitan Business Awards 2022.
5. Motusbank High-Interest Savings Account
Interest Rate: 2.50%
What’s Free: Most daily transactions
Ideal For: Sole proprietorships
Are you a sole proprietor with fairly straightforward banking needs? If so, the Motusbank High-Interest Savings Account is a great option to make the most of your extra cash.
Although it's not technically a business savings account, sole proprietors can use it for their savings goals. And because it's a 100% digital bank with no physical locations, you can manage your money from anywhere.
This account offers a competitive interest rate of 2.50%, which is great news for small business owners looking to get the most bang for their buck. There are no monthly account fees and no minimum balance required. Best of all, most day-to-day transactions come with zero daily banking fees, making this account a great choice for very small business owners with tight margins.
Enjoy unlimited debit purchases and withdrawals, so you can access your funds anytime, anywhere. And if you're a Motusbank cardholder, you'll have access to over 43,000 surcharge-free ATMs in North America – with THE EXCHANGE® Network in Canada and the Allpoint Network in the US.
The Motusbank High-Interest Savings Account is best suited for sole proprietors looking for a simple, accessible, and fee-free way to grow their business savings. If that sounds like what you need, give this account a try.
FAQs
A business savings account is a type of bank account specifically designed for businesses to store their excess funds while earning interest. These accounts are similar to personal savings accounts but cater to the unique needs of businesses. They provide a secure way for them to save money and manage cash flow, while also generating some extra income through interest earned on the account balance.
In Canada, the interest earned on the balance in a business savings account is considered taxable income and must be reported on the business's tax return. The amount of tax owed on the interest earned will depend on the business's tax bracket and the applicable tax rate. Failure to report this income can result in penalties and interest charges.
To open a business savings account, you need typically need to provide a valid government-issued photo ID, proof of business registration (e.g., articles of incorporation, partnership agreement, business license), and proof of business address. Then contact your financial institution of choice to apply in-branch or online, whichever is applicable or preferred. Fill out and submit your application. You may need to provide additional information such as the nature of your business, the number of employees, and annual revenue. Once your application has been approved, you will need to deposit funds into the account to activate it. You can then start using your business savings account to deposit excess funds, earn interest, and manage your business finances.
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About The Author: Heidi Unrau
Heidi Unrau is the senior Finance Journalist at Hardbacon. She studied Economics at the University of Winnipeg, where she fell in love with all-things-finance. At 25, she got her first bank job as an entry-level teller. She moved up the ranks to Credit Analyst, Loans Officer, and now a Personal Finance Writer. In her spare time, you'll find her hiding in the car listening to Freakonomics podcasts, or binge-watching financial crime documentaries with a pint of Häagen-Dazs. When she's not chasing after her two little boys, she's in the hot tub or arguing with her husband over which cash back card to use for date night. She’s addicted to coffee, crypto, and obsessively checking her credit score on Borrowell.
Fun Fact: Heidi has lived in five different provinces across Canada, loves her free Tangerine bank account, and will never cut back on Starbucks. Like ever.
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