Finding the Best High Interest Business Savings Accounts: Fidelity and ING Direct
If you run a business, even if only on the side, you still want to maximize the interest earned on your idle cash. Technically, if you’re a sole proprietor you can simply use a consumer high-interest savings account as there is no legal distinction between you and the business, but for accounting reasons it may be a good idea to separate the two. If you have an LLC or corporation, keeping your personal and business transactions separate is even more important.
While looking for a business-specific savings account, my criteria was a little different than before. I don’t mind rate-chasing a bit with personal accounts, but given the careful accounting records I need to keep, I wanted an institution I could stay with for a long time. Therefore, I was looking for (1) a consistently good rate even if not necessarily always the best, and (2) a place with good customer service.
After doing my research, I ended up opening a Fidelity Account for Businesses at Fidelity Investments several months ago, and it has been working well for me so far. Although you can buy everything from individual stocks to junk bonds with the account, I just keep use my core money market fund (FDRXX). It is actually a very flexible account, with the following features:
- FDRXX is currently yielding 4.96%.
- $2,500 to open, no annual fees.
- Minimum balance requirements waived since it is my Core account.
- Easy access: No limit transaction limit, free checkwriting, available ATM debit card
- Link electronically to multiple external bank accounts, quick transfers
- Great customer service, usually can reach a human in under a minute.
An new option has recently appeared - the ING Direct Orange for Business Savings Account, which also looks to be a competitive product:
- Currently yielding 5.00%
- No minimums, no fees
- Access is limited to online transfers to linked account
- Limit of 6 withdrawals per month due to being a savings account
- Only one linked account is allowed
- Good customer service, at least from what I’ve heard.
In a nutshell, the ING account is leaner and more simple, but it is harder to access your money. I like being able to keep most of my cash at Fidelity since I can write checks directly from that account instead of waiting for a transfer. I am also getting spoiled at Fidelity since whenever I call I get a courteous and knowledgeable human almost immediately! But I think either one would be a good addition for people currently using a business checking account paying little or no interest.
If I’m missing a great alternative, please let me know in the comments.
June 12th, 2007 at 7:45 pm
I was able to link up my LLC bank account with TD Bank North with my personal account at HSBC. I sometimes have excess funds and simply just transfer them to my acct hsbc. For tax purposes its simply member draw, if i decide to put it back into the company its then a member loan!
Personally i would not be happy to be limited to 6 withdrawls a month and find that the other method is simplier!
June 12th, 2007 at 10:17 pm
i use bofa and have added a aaa sponsored cash maximizer account. currently yields about 5.35%.
June 13th, 2007 at 3:10 am
Wamu free business checking is the best business account bar none. They will not nickel and dime you with fees. Then add a Vanguard Prime Money Market account which can be linked electronically at Vanguard. They are consistently among the highest interest in the US. Currently 5.24 APR
June 13th, 2007 at 4:43 am
Thanks for the tip! I’ll be needing a business checking for a corporation later this year and have been wondering what was out there. I used the live chat to ask a couple questions: Unlimited check writing with no minimum check amounts (some MMA have check writing over $200 or something). And they have an EFT solution for moving money in and out electronically.
June 13th, 2007 at 4:50 am
We have a paypal account that we use as a payment option for our customers. We set it up to use the PayPal money market fund as the account for keeping the funds so we use it as our savings account also. It is currentlly paying 5.04%
June 13th, 2007 at 6:26 am
If you are in a highly taxed state, your resulting yield can be even higher at Fidelity by switching your core account to a Tax Exempt Money Market Account.
For example the FNYXX Fidelity NY Muni Money Market is currently at a 7-Day Yeild of 3.15%.
Fed (33%), State, and Local (gotta love New York City) set you back 44%.
Thus the tax equivalant yield is ~5.58%.
June 13th, 2007 at 8:01 am
You can draw an even bigger yield if you put your money in a Municipal Money Market Account. Depending on the state you live in there are different Money Market Accounts that will give you tax break. See:
http://personal.fidelity.com/research/funds/?bar=s.
I have the NY State one and the latest yield was 5.41%
June 13th, 2007 at 10:07 am
After reading your article on ING Direct, I went ahead and opened the savings account. Automatic withdrawls from my checking account will simplify things and 5% aint too shabby. Being limited to 6 free monthly withdrawls isn’t a problem since this is a SAVINGS account.
ING has been around for years and stability is important.
June 13th, 2007 at 10:38 am
Jonathan,
How do you use FDRXX as core account ? I was told by fidelity rep that it can not be used as core account for nonretirement accounts .
June 13th, 2007 at 11:21 am
Business is another topic we can write about to save money. Of course, it should be legitimate, but the whole tax game is in favor of business in general. What kind of business you have (an industry hint would be ok).
Thanks,
June 13th, 2007 at 2:22 pm
My HOA is restricted to only FDIC-insured accounts, so we currently keep our Reserve money in a Capital One Money Market. It allows us to write checks for major expenses and earns 4.4% interest.
We invest the majority of our Reserves that we wont spend in the next few years in a 5 Year CD ladder spread across 5 banks with the highest yielding CDs.
June 13th, 2007 at 6:36 pm
can this fidelity savings account be used as a business checking account? meaning…can I write unlimited checks each month? i have idle cash sitting in a business checking right now earning 0 interest and would like to change that immediately.
also, what do you recommend for the highest yielding, hassle free personal checking account that will earn me more than 4% and allow unlimited check writing? ING is close but limits the checkwriting…
June 14th, 2007 at 6:52 am
Fidelity seems like a great option, but what about depositing checks? Meaning checks for clients made out to the business. The ATM card seems to be for withdrawals only. Am I wrong? If Fidelity has issues with “old-skool” paper depsoits, any other ideas that offer a network of ATMs, no mins, unlimited checking (I feel greedy, but there has to be something out there)?
June 14th, 2007 at 8:52 pm
I get so frustrated when anyone mentions the paypal money market fund. I have several issues with paypal including very slow transfers and the fact that they do not hold the same standards as most banks. My biggest issue is that at one time I had some money in an account with paypal and the interest didn’t add up to what it should have using the interest rate they posted on their website. I looked through the prospectus governing the paypal money market and noticed that there are fees involved with that fund of 1%+ which are temporarily reduced to 0.35%. Using my own calculations, it seems to me that paypal doesn’t really pay their advertised rate, but rather their advertised rate less the required fees mentioned in the prospectus. If my calculations are correct, doesn’t this seem like a very deceptive practice by paypal? Can anyone confirm/dispute my calcs? Until someone can prove otherwise, I hod that paypal has deceptive practices.
June 21st, 2007 at 11:21 pm
I too cringe when I hear people stashing their money under PayPal. I’ve read too many horror stories about PayPal freezing their accounts without reason, and I would hate to see anyone’s money get frozen like that. PayPal is a money transfer service and should not be treated as a bank, even though they can lure you with a high yielding dividend/money market account. Stick with a bank or reputable brokerage service. Just my humble opinion.
June 22nd, 2007 at 8:14 am
I agree, I don’t recommend leaving significant amounts of money with PayPal either.
January 13th, 2008 at 10:57 pm
Agreed. Paypal sucks. They have frozen my funds in the past and I didn’t like it at all.