Advantages and disadvantages of business savings account

All businesses set aside cash for meeting emergency needs for business purpose. Successful businesses also have cash surplus for short term which is used for meeting the regular expenses of business. The business owner sees to it that this money is not locked for longer investment products as this will create a crash crunch. To enjoy a little growth in the amount deposited in the account, storing the funds in business savings account will prove to be profitable for businessmen. 

Advantages

a)    Transactions made from business accounts are generally cheaper than that made from other accounts. In case of transfer from another account to the business account, the charges levied are very less. Some banks also offer fifty to hundred free transfers to encourage customers to opt for business savings account. A personal account on the other hand offers only five to ten free transactions before each transaction starts attracting charges.

b)    Having a business savings account also facilitates availing of business credit card. This is because a business savings account offers greater financial credibility than normal savings accounts.

c)    Business savings account helps in maintaining a record for the different transactions that take place. This helps filing for taxes easier.

d)    A business account that is attached to a business lends validity to the business. This helps in drawing more clients who can check the legitimacy of the business. Moreover business related payments can be made through checks.

Disadvantages

a)    The interest rates on the business accounts are lower than the savings accounts. To counter this problem, a businessman can open a savings account under the name of the company. This will help him earn higher interest rates.

b)    While the transactions are not charged, there are other charges that are levied on a business account which is absent in personal savings account.

c)    In case of overdraft on business account, the interest rates charged are higher. This is because the bank does not have valid credibility that will ensure that the business will run successfully and not fail.

d)    As the premiums involved in the opening of a business savings account are higher, when opening an account, the credit history of the applicant is checked. In case of poor credit history of the applicant it becomes very difficult to avail a business savings account.

e)    The paper work needed for opening a business savings account is more comprehensive as compared to a normal savings account. The processing time taken is also very long.