What is a business deposit account?
Business Deposit accounts are also known as investment accounts. These are a type of savings account that allows your business to earn interest on lump sums or regular amounts of money that are paid into the account. There may be a notice period that you need to provide to make withdrawals. If you do not give the required notice, you could be penalised, typically by a loss of interest.
Notice periods are usually seven, 30, 60 or 90 days, even though some accounts designate other periods. As a general rule, the longer the notice period is, the higher the interest rate you will receive.
Who are they suitable for?
No notice deposit accounts or those that are also known as instant or easy access accounts are right for you if you want to dodge being penalised for making withdrawals that are unscheduled. However, higher interest rates can be received from notice accounts, so if you will take a longer-term view of withdrawals, this may better for your business.
What to look out for
Make sure that you understand exactly what the notice period is and what the withdrawal penalty is for early access to your funds.
Penalties normally come in the form of loss of interest. This will typically be for the same amount of time as the required notice period, but could also be longer. So, if the penalty on the account is equivalent to 60 days' loss of interest and you want to withdraw £1,000 from your account, then the interest you would have earned on the £1,000 for the 60 days before the withdrawal will be discounted, maybe even more.
Interest rates may have a bonus element for a designated time. If this is the case, you will need to keep an eye on the account to make sure that you are getting a competitive interest rate when the bonus period ends. It is wise to set up a calendar reminder to ensure that you shop around when you get to that point.