Interest Grows in Business Banking Thanks to the repeal of a banking law, business bank accounts may now earn interest. But community banks aren't pleased.
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Some entreprepreneurs are about to get a bit more change in their pockets.
Thanks to the repeal late this week of a rather arcane banking law known as Regulation Q, banks may once again pay interest on commercial accounts for the first time since 1933.
As you can imagine, banks are not happy about having to shell out for the right to warehouse your business's money. The trade group Independent Community Bankers of America recently expressed its disappointment that the rule was allowed to expire. The organization had lobbied heartily against the move.
Why? They're afraid big, deeper-pocketed banks are about to woo you away.
It's likely their fears are justified.
Capital One today revealed its new Clear Interest Business Checking account. The website for the program even has a calculator to help you discover how much you'd make in a year if you switched to this type of account.
Interest varies by state, and, so far, it appears that Clear Interest is only available in eight of them -- including population-heavy New York and Texas -- plus the District of Columbia. In most states, the interest rate is 1.1 percent, meaning if you have $60,000 on account you'd earn $660 a year.
Obviously, it's not a huge interest rate, but if you're in a business that needs to maintain a high account balance, it does add up. Clear Interest also comes with a bunch of other perks -- no monthly fees on balances over $10,000 and 300 free transactions a month, to name just two.
As the economy improves and interest rates rise again, we could see higher interest rates on business accounts, too.
Expect other banks to follow suit with similar offers. Community banks will no doubt feel pressure to offer their own interest-paying plans for business checking. The question is whether entrepreneurs who bank locally and have longstanding relationships with community bankers will switch to a big, national chain to get a better interest-bearing account deal.
Will you switch banks for an interest-bearing account? Leave a comment and tell us your reaction to this news.