Business savings accounts and money market accounts can be great choices to kick-start savings to fund your business’s growth, but which one is best for you?
These accounts are both designed to help you put money aside so you can save for your business’s forthcoming needs and future growth.
So, whether you choose one or the other — or both — depends on where your business is on its financial journey and your longer-term savings goals.
Continue reading as we examine each account type to better understand how they work and their intended purposes.
BUSINESS SAVINGS ACCOUNTS
A business savings account is a great place to start putting money aside for your business. In fact, many credit unions make this your primary account when your business becomes a member. Typically, business savings accounts include:
- Low required opening deposit
- Low or no minimum balance requirement
- Dividends paid on deposits
- Ability to transfer or withdraw funds
A basic business savings account is ideal for smaller businesses looking to lay a basic savings foundation with limited excess funds. In most cases, these businesses will want to use their account for shorter-term savings and emergency funds.
BUSINESS MONEY MARKET ACCOUNTS
Business money market accounts are designed to offer higher dividends by offering rates closer to prevailing money market rates. They achieve this while keeping your funds relatively liquid and accessible compared to other term investment options, such as share certificates.
Key features of this account include:
- Tiered rates that offer potentially higher dividends than a share savings account
- Higher minimum balance is required to earn dividends
- Ability to transfer and withdraw funds
- Dividends computed daily and paid monthly
Money market accounts can be a wise choice for established businesses seeking higher returns, yet simultaneously keeping funds available for unforeseen opportunities or expenses.
BUSINESS SAVINGS VS. MONEY MARKET ACCOUNTS
Now, we’ll consider three important differences between business savings and money market accounts.
1. DIVIDEND RATES
Business savings accounts offer a single, fixed dividend rate. This is generally substantially lower than the rates you’d get on a money market account and remains the same no matter how much money you have in your account.
Money market accounts in general offer overall higher rates, but in a tiered structure, with the best rates going to accounts with the highest balances.
2. LIQUIDITY
Money in both business savings and business money market accounts is always fully accessible through your branch. However, most banks and credit unions limit the number of electronic withdrawals you may make on these accounts, usually to six transactions a month. (Wasatch Peaks does not limit electronic withdrawals on any of its business accounts.)
However, money invested in both business savings and business money market accounts is still more attainable than funds in comparable term investments like share certificates or bonds.
3. MINIMUM BALANCE REQUIREMENTS
Business savings accounts are intended to allow businesses to set any amount of money apart from their working finances, and so opening requirements are low.
Money market accounts are designed to allow businesses to grow funds into a substantial savings nest egg. That means financial institutions often require a minimum deposit of $1,000 or more to open an account. They may also charge a maintenance fee for amounts under this or pay interest or dividends only above a certain minimum threshold.
WHICH IS BEST FOR YOUR BUSINESS?
Let’s take a look at specific situations where one or the other account (or both) may make sense for your business.
BUSINESS SAVINGS
When you join a credit union as a business, you’ll often automatically open a primary savings account to establish your membership. But, is this basic business savings account enough for your company’s savings needs?
A business savings account is great for holding funds separate from your checking account for the short term. For early-stage companies, it’s a convenient place to keep money you might need for purchasing or payroll bonuses. Your money is available to withdraw but has limited opportunities to grow.
BUSINESS MONEY MARKET
A money market account is a smart choice for substantial savings you want to grow to support your company's future, with funds remaining accessible for unexpected expenses. It’s often a practical option for established companies seeking higher dividend rates while still keeping their cash close at hand.
BOTH ACCOUNTS
In practice, most businesses open a money market account after first establishing a business savings account. This is a great approach because these two accounts work well in combination.
Start by accumulating funds in a business savings account. As your savings grow, consider transferring larger amounts to a business money market account.
That way, you’ll have a separate source of available cash for short-term expenses and a steadily growing lump sum for supporting your company’s long-term growth.
TAKE YOUR BUSINESS SAVINGS HIGHER
Wasatch Peaks Credit Union has been helping businesses start and succeed in Weber, Davis, and Morgan counties for decades. We support our business members with high-quality financial products like our Business Share Savings and Business Money Market Accounts, as well as with ongoing support, in-depth local knowledge, and expert financial advice.
Talk to us about your business’s specific savings needs. We’ll recommend a savings strategy that will support you and your staff now and into the future.
Contact us today, or click below to learn more about our business savings products.
