Set up your business for success with a high-interest savings account designed to earn you a little extra outside of your everyday chequing account.
A business account not only keeps your funds accessible, should you need them for immediate use, but it also helps protect your cash from losing value due to inflation. Having a business savings account keeps your business finances separate from your personal finances – which can be very useful come tax season – and it allows you to take advantage of special deals that banks often provide specifically to help business owners succeed.
Given all the benefits of having a business savings account, it’s understandable why so many business owners have taken advantage of these accounts to store and grow their money.
Popular business savings accounts used by business owners*
Savings account name
Interest rate range
Minimum Balance
Maximum Balance
Fees
CIBC Business Investment Growth Account
0.70% – 1.20%
N/A
N/A
$0 monthly fee
Transactions: $1.00 each $1.25 each, full-service (via teller, either in-branch or by phone) $5.00 per debit
Deposits: $0.22 per cheque deposited $2.25 per $1,000 cash deposited $2.50 per $1,000 cash deposited, full-service (via teller, either in-branch or by phone) $2.50 per $100 in deposited coins
Transfers between accounts: $0 $5.00 each, full-service (via teller, either in-branch or by phone)
TD Business Savings Account
0.45% – 0.95%
N/A
N/A
$0 monthly fee (note: you must have a TD Business Chequing Account to be able to open a Business Savings Account)
Deposits: $1.00 each $2.50 per $1,000 monthly cash deposits $0.22 per cheque
Withdrawals: $5.00 each
Transfers between accounts: Free to/from any TD Canada Trust account
RBC Basic Business Savings Account
0.45% – 0.95%
N/A
N/A
$0 monthly fee
Deposits: 999 free deposits/credits, then $1.00 each $1.00 per cheque $10.00 per $1,000 deposited
Withdrawals (debits & cheques): 2 free, then $3.50 each
Transfer between accounts: Free when done online, at an ABM or via the RBC Mobile App
Scotiabank Right Size Savings for Business
0.80% – 1.70%
$10,000 to start earning interest
(you can open an account with any balance, however you won’t earn interest until your balance is at least $10,000)
$2,000,000
$0 monthly fee if balance is at least $10,000, otherwise $6.00
Withdrawals: $5.00 per ABM withdrawal, cheque, bill payment or any type of debit
Transfers between accounts: Free to/from other Scotiabank accounts when using self-service options (i.e. online, automated phone services, ABM etc.) and not a bank representative
Tangerine Business Savings Account
0.90% – 1.40%
N/A
N/A
$0 monthly fee
No other fees
HSBC Business Savings Account
1.20% – 1.70%
$25,000
(once this account is opened, the balance must remain at/above this amount to earn interest)
N/A
$0 monthly account fee
Deposits: $0.20 per cheque $2.50 per $1,000 cash deposited $2.50 per $100 in deposited coins
Withdrawals: $1.00 for all withdrawals (i.e. debits, ATMs and online/phone/mobile banking)
Transfers between accounts: Free to/from other HSBC Canada accounts when using self-service options (i.e. online, mobile app and phone banking) and not a bank representative
$4.50 per phone request made to HSBC Bank Canada branch
* Rates and information as of May 1, 2019
What is a business savings account?
A business savings account is just like a personal savings account, allowing you to store your money and earn interest over time. When you’ve saved up enough working capital that you have more than you need to access regularly, you can safely grow over time it with interest until a large purchase comes up. Unlike many other investments, like mutual funds and GICs, you have more flexibility to withdraw from a business savings account without incurring large penalties or having to wait for your withdrawal request to be processed.
To entice your business, many banks offer business savings accounts with tiered interest rates, in which the interest rate increases as the balance in the account increases. The bigger your business’s savings, the more you earn.
What are the benefits of a business savings account?
Business savings accounts are designed to separate your capital from everyday transactions, helping you to manage and grow your savings. Many banks offer introductory interest rates that can boost your savings for up to 6 months or more, and most accounts are protected by the Canada Deposit Insurance Corporation (CDIC) for up to $100,000.
Build your savings. Keep your money safe and earn passive income when it’s not needed for everyday business, helping you achieve both short- and long-term goals.
Avoid fees. Move your money around with minimal transaction fees.
Easy access. Withdrawals cannot exceed a certain limit without incurring a per-transaction fee, but banks often allow you to transfer to a linked chequing account in the same bank for free.
Boost your business’s credit. A business account becomes a part of your overall financial portfolio, demonstrating that you’re able to successfully manage your savings and providing the support for future business loans.
CDIC-insured. Savings is safer, thanks to the CDIC. The government insures deposits for up to $100,000 at every eligible bank you have an account with, so you can rest assured your money is safe. If you have accounts at multiple CDIC-covered banks, you will be eligible for multiple increments of $100,000 in coverage.
What should I look out for?
Unlike investment accounts, there’s no risk of losing your balance with a high-interest business savings account unless your balance exceeds $100,000. Even then, banks put in place safeguards to protect your money.
To narrow down a business account that fits your business’s needs, weigh the following factors:
Account fees. Many high-interest accounts waive fees for high balances, but ask about monthly maintenance, deposit or penalty fees for exceeding transaction limits or dipping below minimum balances.
Transaction limits. All savings accounts limit your withdrawals to a certain amount per month, though you can transfer money to a linked checking account to be able to access it more easily and handle it as you need to.
Potentially high minimums. To take full advantage of business perks, some accounts require that you maintain a particularly high minimum balance (potentially $10,000 or more).
How do I compare the best business savings accounts?
Look for a savings account that meets your business’s financial goals. Most banks reward businesses with preferred interest rates on all business accounts, but you may need to focus on high-yield accounts at other banks.
Think about whether you’ll need regular access to your funds or a tool that can become part of your overall long-term investment strategy. You may be able to get a better interest rate by getting a Guaranteed Investment Certificates (GICs) with your bank. These are designed to lock away your money for a fixed term, after which, you get it back with interest.
Look at advertised interest rates both locally and online, further analyzing fees and limitations that can eat into your bottom line. By shopping around, you can get the strongest rates and perks your business is eligible for today and as you grow.
Some banks (like Tangerine and EQ Bank) operate strictly online, so you might miss out on good savings options if you limit your search to brick-and-mortar institutions alone.
To get the most out of a business savings account, compare similar factors across each of your banking options so you can better tell how they size up next to one another. Such factors should including:
Fees. If you’re a smaller business, you may be on the hook for monthly maintenance fees, though many banks waive these fees if you pick up other bank accounts or products.
Transaction limits. Savings accounts come with transaction limits to prevent frequent withdrawals and promote the growth of your money. You will typically have to pay a penalty when you go over this limit – fees can range from $2.50 – $5.00 or more per transaction. Know your bank’s policies so you won’t be caught off guard by fees you didn’t budget for.
Interest rates. With so many banks competing for your business, you might find higher introductory rates applying to your savings for up to six months or more after opening your account. Afterwards, these rates will go down, where they will remain unless you become eligible for another promotional rate down the road.
Accessibility. Many online banks offer higher interest rates than you’ll find at your local bank because of the lack of overhead costs. You won’t have the convenience of a neighborhood branch, but an extensive ABM network and linked account with your local bank could be worth the savings anyway.
Minimum balance. How much you’ll need to keep in your account can range from a nothing to tens of thousands of dollars, with higher rates applying to higher balances.
Maximum balance. Even though business savings accounts are designed to grow your money, some banks only let you grow up to a certain point. One reason for this is for banks to be able to afford the interest rate and range of services that come with their business savings accounts. Business savings accounts with maximum limits are better for small and medium-sized businesses whose savings will not reach the amounts held by large corporations. If you run a large business, you’ll want to find a business savings account with a bank that is large and established enough to be able to support the unlimited growth of your funds.
Do large bank transfers take longer?
Not necessarily. Your bank’s system can support transfers of $2,000 to $200,000 without extra lag. Keep in mind that your bank may limit the amount you’re able to transfer in one transaction or to a specific recipient, though you may be able to speak to a bank representative and get a temporary limit increase to accommodate larger transactions.
One reason for delaying large transfers is to make sure the transaction is not fraudulent. Though most transactions are in the clear, those that aren’t amount to billions of dollars in lost funds every year.
In 2018 alone, Competition Bureau Canada reported that Canadians lost nearly $100 million to scams.
Banks receiving money as well as the clearinghouse that facilitates transfers want to make sure that the money being transferred actually shows up before allowing it to be electronically processed through the system.
Case study: How keeping surplus capital in a business savings account can help grow your business
Jen works a full-time government job and has two children under the age of 12. As a single working mother, Jen started an out-of-home baking business selling custom-made desserts to friends and family.
Now into the second year of her home business, her client base has grown and her services have expanded to include baking for large corporate events, baby showers and weddings. Jen knows she will need to upgrade her kitchen equipment to handle the influx of clients and their large-scale orders. About six months into her business, she opened a Tangerine Business Savings account.
Tangerine was running a limited-time promotion when Jen opened her account, so she was able to get a competitive introductory interest rate of 1.40% on all funds deposited for the first 6 months. (Normally, she would only be able to get this high-tier rate if her balance reached a larger amount.)
Jen hopes this will help her afford a bigger oven and other industrial-sized kitchen appliances she needs to accommodate her growing business. In addition, her Tangerine Business Savings Account charges no monthly service fees and offers online and mobile banking services, which means she is able to manage her funds easily anytime, anywhere.
How am I taxed on my business savings account?
The interest you earn on a business savings account is considered taxable income. If you earn more than $50 in interest on your account, you’ll receive a T5 tax slip from your bank to file with your annual taxes.
Who is responsible for my business’s Visa credit card debt?
This depends on the liability option you selected when applying for the credit card. Company liability means that the company assumes liability for all transactions on the card, while individual liability means that one nominated person (for example a sole owner or a business employee) is responsible for paying off the debt on the card. Joint and several liability is suitable for partnerships and sees all partners accept joint and several liability for any debt on the card.
What’s the best bank account for regularly depositing cheques?
Because no two businesses are alike in their specific usage of cheques, you won’t find a bank account designed particularly for cheque deposits. However, accounts come with varying fees for handling cheques and other paper instruments, so you should compare these fees to determine which account will work best for you. If you deposit a lot of cheques, look for an account that charges low or no fees for deposits so that you don’t lose an increasing proportion of money just because business starts to boom.[/fin_hide]
Bottom line
Your business may be ready to set aside some of its hard-earned cash into an account that will grow moreso than if it simply sat in an everyday chequing account. Reliable rates mean steady passive income, and most accounts offer the protection of the CDIC for up to $100,000.
To take full advantage of these high-interest savings accounts, look for low fees and accessibility that meets your business’s demands both today and in the future.
Common questions about business savings accounts
No, not all business savings accounts offer high yields. Different business savings accounts meet the needs of different businesses, but paying a high interest rate certainly makes a business account more competitive. Making sure the account you choose will help grow your capital and accommodate your specific needs is an important consideration.
Yes. Look for a business account allows you to designate access for specific employees. Note that, as the account holder, you’re still responsible for the account and your employee’s actions, so make sure you only grant access to people you trust.
Not necessarily. Usually, your credit score is often not required, or is unimportant, when determining whether you can open a business savings account. The most important factor is actually whether you meet the bank’s stated eligibility requirements for opening a particular business savings account.
These requirements may include a minimum business income, a minimum deposit and proof that you own a legitimate, registered business. Bank policies can vary, however, so you’ll need to check with your bank to know for sure whether your credit score is a factor.
Although owners of sole proprietorships report their business finances on their personal tax returns, business and personal bank activity must be kept separate. The Government of Canada requires sole proprietorships to process cheques using a bank account in their business’s name.
The CRA is much more likely to flag you and require an audit if you mix up your personal finances with your business finances.
Additionally, if you do ever get audited or need to track your financial activity for any reason, having all your business finances separate and in one place will make it a lot easier to find what you’re looking for. If you want to avoid a surprise audit and the headache trying to sift through your bank activity to find information specifically pertaining to your business, you should keep your personal financial activity away from your business savings account.
Generally, yes. Whether for personal or business use, savings accounts are very liquid and accessible, though watch out for limits on the number of times you can withdraw funds from your account in any given month.
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Jen works a full-time government job and has two children under the age of 12. As a single working mother, Jen started an out-of-home baking business selling custom-made desserts to friends and family.