Learn more about the benefits of opening a business notice savings account.
Opening a business savings account means your business will have money to fall back on in an emergency. You can also earn interest on that money - and with interest rates having risen over the last few years, savings accounts have become a lot more competitive. Let's look at how business notice accounts work.
A business notice savings account is a type of business account that requires you to give notice before you can access your money. The amount of notice you need to give can vary dramatically, but generally, the longer the notice period, the better the interest rate you’ll receive.
Overall, notice accounts pay higher rates of interest than savings accounts that let you access your money instantly. However, rates might not be as high as with a fixed-rate bond, where you’re required to lock away your business funds for a set time.
How does a business notice account work?
Business notice savings accounts work similarly to other savings accounts, but they require you to notify the provider ahead of time if you want to make a withdrawal.
How much notice is required varies depending on the account and the provider, but it’s usually anywhere between 30 and 180 days. When comparing notice accounts, you’ll need to consider how far you can plan ahead to work out how much notice you can realistically give before withdrawing funds. In some cases, you might be able to access your money faster, but you’ll usually pay a penalty.
It’s also important to check minimum and maximum deposit requirements to be sure you can meet them. You can usually add to your funds as and when you need to.
Are my savings protected by the FSCS?
As long as your savings account is with a bank or building society authorised by the Financial Conduct Authority (FCA) or Prudential Regulation Authority (PRA), your savings will be covered by the Financial Services Compensation Scheme (FSCS) up to a limit of £120,000.
However, if your savings is with an e-money provider, your funds won’t be protected by the FSCS. Instead, as long as the provider is regulated by the FCA, your money will be held in segregated accounts, so if the provider ceases trading, you should still get your money back.
Are there any other alternatives?
Yes, there are a number of other types of business savings account to consider. If you’d prefer to access your money whenever you need it, a business easy access account would be more suitable. However, interest rates are generally lower than notice accounts.
Alternatively, if you’re prepared to lock away some of your business savings for a period of between 1 and 5 years, you will earn an even higher rate of interest with a business fixed-rate bond. However, you can’t access your money during this time, and you usually can’t add to your savings either.
Bottom line
Business notice accounts can offer a good compromise between an easy access account and a fixed-rate bond. You’ll typically earn a higher rate of interest than an easy access account, but you won’t need to lock away your funds for a lengthy period as you would with a fixed-rate bond.
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Rachel Wait is a freelance journalist and has been writing about personal finance for more than a decade, covering everything from insurance to mortgages. She has written for a range of personal finance websites and national newspapers, including The Observer, The Mail on Sunday, The Sun and the Evening Standard. Rachel is a keen baker in her spare time.
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