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Part of Naming the money before you move it into business savings
Four business savings account shapes and how they trade access for return
Business savings products grouped into four shapes, with what each trades away, the disqualifiers to screen candidates and why access is compared before rate.
Shortlisting a place to keep business savings is not a shopping exercise. It is a due diligence exercise. The useful version runs on written answers to a fixed set of questions, not on a comparison table someone else built.
This page names no institution and quotes no figures. It gives you the questions, the disqualifiers, and an order of comparison that puts access ahead of return. That order stops a reserve from being unavailable on the day it matters.
What to take away
- Decide the shape of the product before you look for a provider. Access requirements eliminate more candidates than pricing does.
- Ask in writing and keep the replies. A verbal answer about a measurement basis has no value three months later.
- Compare on access fit first, charges second, rate last. Reversing that order is how reserves end up locked up.
Four shapes, and what each one trades
Products for holding business cash come in a small number of structures, and the names vary between institutions. Ask which of these four you are being offered rather than relying on the label: an instant access deposit, a notice or term deposit, a money market style account, and a placement or sweep arrangement that spreads the balance across other institutions.
Four shapes of business savings
Instant access
- What it gives
- Reachable money
- What it takes
- Lowest return
- Access
- No notice
- Main risk
- Low yield
Notice or term
- What it gives
- Better return
- What it takes
- Notice or penalty
- Access
- Notice or penalty
- Main risk
- Locked funds
Money market
- What it gives
- Return plus transfers
- What it takes
- Allowances and minimums
- Access
- Per-cycle limits
- Main risk
- Conditions missed
Placement or sweep
- What it gives
- Spread balances
- What it takes
- Complexity and delay
- Access
- Slow full withdrawal
- Main risk
- Who holds money
What it gives you
- Instant access deposit
- Money reachable without notice, simple terms
- Notice or term deposit
- A better return for committing time
- Money market style account
- Some return with check or transfer capability
- Placement or sweep arrangement
- Balances spread across institutions, sometimes for coverage reasons
What it takes
- Instant access deposit
- Usually the lowest return of the four
- Notice or term deposit
- Access, either through required notice or a penalty for early withdrawal
- Money market style account
- Often transfer allowances, minimum balances, and conditions per cycle
- Placement or sweep arrangement
- Complexity about who holds the money and how quickly it comes back
Read the four as a trade rather than a ranking. An instant access deposit gives up almost nothing in access and takes the least return for it. A notice or term deposit pays for the notice period or the maturity date it imposes, and takes a penalty if you break it early. A money market style account tends to pay more than a plain deposit while keeping access looser than a term account, and takes a minimum balance or a limit on withdrawals in exchange. A placement or sweep arrangement is built for size rather than rate: it suits a balance that is large for one institution, and it takes a service layer, more than one holder and a withdrawal that takes longer to complete.
The placement or sweep arrangement, the fourth shape, needs the most care. Ask which institution actually holds each part of the balance, whether the arrangement is a deposit at all, and how long a full withdrawal takes end to end. Arrangements of this kind are often described as reciprocal deposits, and the answer to who holds the money decides everything that follows.
Deposit insurance exists at insured banks and insured credit unions, but limits and conditions apply and depend on titling. Confirm the position against the deposit insurance rules the FDIC publishes for banks, or the share insurance material the NCUA publishes for credit unions, rather than with the provider's summary.
Match the shape to the bucket first
Before you name any provider, decide which bucket is being placed. The true reserve, the money that protects the business on its worst day, rules out anything with notice periods or early withdrawal penalties, whatever it pays.
Money with a known date and a known purpose can accept a commitment, because you are giving up access you were not going to use.
The release rule follows the bucket. The reserve, the money that protects the business on its worst day, has to be reachable without notice and without penalty, whatever the account pays. Dated money, set aside for a known payment or a planned purchase, can carry a notice period or a maturity date, because its release date is already known and the money was not going to be spent before it. Doing this first usually removes most of the market in a single step. How different business shapes fail these rules is in the reserve patterns worth studying.
The questions to send in writing
Put these in an email to each candidate and keep the replies with the account record. A provider that will not answer in writing has answered.
- Is the balance held in the business's name as a deposit, and which institution holds it?
- Is the account insured, under which ownership category would our balance be covered, and does the titling we want still qualify?
- What is the exact product name in your own disclosure documents?
- What notice, settlement or maturity period applies before a withdrawal can be made?
- How is any early withdrawal penalty or fee calculated, and which events trigger it?
- How many withdrawals are permitted, how is each one counted, and can the limit change?
- What destinations can a withdrawal be sent to, and who must authorize it?
- What minimum or average balance must be maintained, and what happens when it is not?
- Which fee lines apply in a month when the account is quiet, and which apply when it is active?
- What happens if the institution holding the money changes, merges or leaves the arrangement?
- What documents are required to open, and to change titling or signers later?
- How is the account closed, how long does closing take, and what does it cost?
Questions to send in writing
- Deposit, placement, or investment product?
- Which institution holds and titles the money?
- What conditions must be met for the rate?
- What happens if a condition is missed?
- How many outgoing transfers per cycle?
- Where can funds be sent on withdrawal?
- Is notice required, and what penalty?
- What is required to close and move?
The last question is the one people skip and the one that separates candidates. An account you can leave cleanly costs you far less when you are wrong.
Disqualifiers
Any of these removes a candidate before scoring begins.
- The provider will not say plainly whether the balance is a deposit and who holds it.
- The reserve would be subject to a penalty for early withdrawal.
- Withdrawals can only go to one destination and that destination is not under your control.
- The fee schedule is not available in writing before you apply.
- Qualifying would require stranding money that has a job elsewhere.
- The only stated route to support is a form, with no published response time.
- The titling being offered does not match your entity exactly.
Compare in the right order
Sort the surviving candidates like this, and stop as soon as one order decides it.
- Access fit.Notice period, early withdrawal penalty, withdrawal route, and whether the reserve could be reached on the worst day.
- Charges and conditions.The fee schedule, the minimum balance basis, activity conditions, and the cost of leaving.
- Holder and insurance.Who holds each part of the balance, whether it is a deposit, how the titling sits in the coverage categories, and what happens if the holder changes.
- Rate.What the quoted rate is attached to, how it is credited, and what happens to it when the market moves.
Compare candidates in this order
- Access fittest with a small transfer
- Chargesnet every charge against return
- Conditions you will actually meet
- Ratecompare the ongoing figure last
Rates change and the first three do not, which is why a shortlist built in this order keeps working. What the rate is attached to, and how to compute what an account really paid, is covered in reading a quoted yield properly.
Where to start
Decide the bucket, decide the shape, send the twelve questions, and eliminate on access before anyone quotes you anything. The account you end up with will be duller than the one at the top of a comparison table and considerably more useful on a bad day.
Common questions
Should the savings account be at the same institution as the operating account?
There are real advantages: transfers between them are usually simpler and faster, and one relationship is easier to manage. There are also real reasons to separate, including distance from the money and redundancy if one provider has a bad week. Decide deliberately rather than by default.
Is a credit union worth considering for reserves?
Worth considering, subject to eligibility, and the comparison runs on the same questions as any other candidate. Insured credit unions are covered by the NCUA rather than the FDIC, with its own rules on limits and conditions.
How many accounts should a small business hold?
Enough to separate money that belongs to other people from money that is yours, plus a reserve you have to make an effort to reach. Beyond that, each extra account brings conditions to satisfy and a statement to read.
What documents will be asked for?
Broadly the same entity and authority evidence as any business account, plus attention to titling. The full picture, including the conditions that continue after opening, is in what the account will require of you.
