Ally is an incredibly popular bank with excellent offerings across the range of banking services. Operating online-only, Ally can offer terrific value by cutting out many of the costs associated with retail banking. It is no wonder that cost-conscious businesses want to turn to Ally for business banking products. But is an Ally business savings account a good choice?
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Just like individuals and households, businesses stand to benefit from keeping funds in a savings account. Of course, companies open savings accounts for different reasons than families and with different goals in mind. Some of the reasons why your business may want to open a savings account include:
- Save for taxes. You don’t want to be left short of cash when your tax bill comes due, paying your taxes late leads to costly penalties. A business savings account is a great way to keep your taxes separate from your day to day business cash flow.
- A cash buffer. Just like households, businesses can experience sudden cash crunches. Cash saved in a savings account can help your business survive rough spots better than it otherwise would.
- Earn interest. Checking accounts rarely pay much interest. Your business can earn at least some interest by putting extra cash into a business savings account.
Just like any financial product, it is worth evaluating the features and benefits of a business savings account before your business decides to transfer hard-earned cash. But what should you look for in a business savings account? We suggest you consider the following:
- Interest rate. Particularly relevant where your business is saving large amounts, the interest rate on the account should be one of the first factors you look at when comparing accounts. Also, consider how often the rate is adjusted – is it matched to Fed rates, for example?
- Reputation of the bank. FDIC-insured banks offer deposit protection of up to $250,000 but larger amounts are not protected, anywhere. So be careful to choose a business savings account at a reputable institution that you can trust.
- Access to funds. Some high-interest savings accounts put restrictions on how quickly you can access funds. Savings tied up in long-term deposit accounts at higher rates will earn more interest, but your business can’t use those funds in an emergency.
In the previous section we mentioned that interest rates are one of the top considerations when choosing a business savings account. That’s why a lot of business owners look to popular online bank, Ally, for a business savings account.Ally offers savings accounts paying a solid 1.80 % p.a., regardless of how much money there is in the account. This is a very attractive rate, but for businesses, there is a problem in that Ally does not offer savings accounts dedicated to businesses.
Unfortunately, this means that most businesses cannot take advantage of the high interest rate on an Ally savings account. The exception is small, owner-operated businesses. If you are self-employed or the only person working for your business, you could open a personal savings account with Ally to save money, as long as you are receiving your business income in a personal checking account.
Thankfully you have plenty of options if you need to open a savings account for your business. We couldn’t possibly list all the business savings accounts on the market, but we think you should put these accounts at the top of your list:
Capital One. At the time of writing Capital One offers an interesting bonus offer with 75% on funds saved for the first 12 months, which compares well to the Ally personal savings product. After 12 months you get 0.4%. There is no minimum investment amount and no monthly fee. The first six transactions a month are free too.
Live Oak Bank. A lesser-known bank that is also insured by the FDIC, Live Oak Bank offers business customers the opportunity to save and earn an ongoing 1.05% on their savings balances. Like Capital One there is no minimum balance requirement, and you can make up to six withdrawals a month free of charge.
Wells Fargo. Business owners will be familiar with Wells Fargo and its broadly distributed range of branches that can be found across the United States. Wells Fargo offers a business savings account, but it pays only 0.05% on balances of less than $25,000. However, open a Business Platinum Savings account and you can get a business savings rate of 1.30% on balances of $25,000 and over. Note that Wells Fargo business savings accounts charge service fees.
As you can see each bank’s savings proposition has pros and cons and you need to think about your business goals as you choose a business savings account. Incorporated businesses with more than one owner obviously can’t stash funds in a personal Ally savings account and should pick a bank with a dedicated business savings account.
Though the Capital One savings account offers a good initial rate, your business will revert to a lower rate after 12 months, but it is a good option if you’re looking to save for a short period. Live Oak Bank’s savings rate is solid, but the lack of brand awareness could be of concern. For some businesses the safety of a Wells Fargo account and getting at least some interest on savings will be particularly appealing.