Navigating Business Finances in Maryland: A Guide to Interest Checking Accounts

Maryland business woman for business checking meetingBusinesses have long relied on checking accounts. On average, businesses issue 4.4 checks a day, primarily for benefits such as cash flow management and ease of payment. However, many owners don’t realize they can increase revenue by opening an interest-bearing business checking account in Maryland.

An interest-bearing checking account allows business owners to earn passive income, making it an attractive option for financially savvy proprietors. To get started, learn how this type of business checking account works and compares to other interest-bearing bank accounts.

Then, you’ll be ready to decide if this is the best option for your business.

How Interest-Bearing Business Checking Accounts Work

Interest-bearing business checking accounts operate similarly to standard checking accounts. Both share many of the same features, such as writing checks, withdrawing funds, paying bills, and making deposits.

Additionally, business owners can use online banking with standard and interest-bearing checking accounts as long as it’s available at their financial institution.

However, a standard business checking account in Maryland doesn’t accumulate interest. Also, interest-bearing accounts typically have requirements that aren’t part of traditional business checking accounts.

Earning Interest With a Business Checking Account

Similar to a savings account, an interest-bearing business checking account calculates and disperses interest payments based on the account balance and annual percentage yield (APY) offered during sign-up.

Interest rates vary between banks, but the APY is generally lower than savings accounts. For instance, theaverage APY for interest-bearing checking accounts was 0.07% in October 2023 during which time savings accounts had an average APY of 0.46%.

However, it’s possible to find checking accounts with APYs that exceed the national average. For instance, accounts advertising “competitive rates” generally offer higher interest. These are high-yield checking accounts with APYs of 0.50% and higher.

As with the APY, the compounding schedule depends on the bank. Many institutions compound interest daily, weekly, or monthly, while others do it quarterly or even annually. Regardless of the compounding schedule, interest is usually deposited in the accounts each month and available immediately.

Special Considerations for Interest-Bearing Business Checking Accounts

Some banks charge fees to all interest-bearing business checking accountholders. But others waive the fees for those who maintain a minimum balance. According to Bankrate’s 2022 fee survey, the average minimum balance required to avoid fees on interest-bearing checking accounts is $8,684.

person with a screen, Green check mark for compliance, certification or audit concept with a business man holding a digital hologram of green compliance tick symbolHowever, finding a business checking account in Maryland with a balance minimum of as low as $1,000 is possible. Additionally, some financial institutions have stipulations that impact the APY, such as direct deposit and debit transaction requirements.

According to the FDIC, these institutions generally require that accountholders have at least one direct deposit and 10-15 debit card transactions each month. Those who fail to meet the requirements experience a reduction in their APY, referred to as the “fall-back” interest rate.

Finally, some banks also implement a balance cap, meaning they’ll only pay interest on deposits up to a certain amount. Accountholders continue earning interest after reaching the cap, but it defaults to the fall-back interest rate.

Choosing Between Interest Bank Accounts and Money Market Accounts

Money market accounts and interest-bearing business checking accounts in Maryland share some characteristics. For example, both accounts include check writing and ATM privileges, and accountholders earn interest on their balances.

However, money market accounts offer higher interest rates than business checking accounts. The national deposit rate for money market accounts was 0.65% in October 2023, compared to 0.07% for interest-bearing checking accounts.

The high interest rate draws some business owners to money market accounts, but it’s important to note that they don’t offer the same degree of flexibility as business checking accounts.

Mostfinancial institutions limit money market account holders to six monthly transfers and withdrawals, creating challenges when managing daily operations. Additionally, money market accounts require a higher minimum balance than interest-bearing checking accounts.

Business owners who want both flexibility and high interest rates often open both types of accounts. They earn interest on the money market account and business checking account in Maryland without sacrificing the ability to make transactions.

Discuss Your Business Checking Account Options

man holding clipboard with checklist employee workplace is reviewing documentsChoosing the appropriate financial products and services is essential to running a successful business. The right business checking account can help you manage the day-to-day operations while safeguarding your financial future.

Details can leave business owners overwhelmed and unsure of how to proceed, but Woodsboro Bank can better explain the available options. Woodsboro Bank works directly with business owners, assessing their needs and recommending solutions.

Contact us today to discuss interest-bearing business bank accounts, money market accounts, and other financial offerings. Whether you are a sole proprietor or operate a large business, you will get personalized service at Woodsboro Bank.

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