Most business checking accounts pay little or no interest
A business checking account is designed for deposits and withdrawals, not for earning money on your balance. Most banks pay zero interest on business checking, meaning your money sits in the account without growing. Some banks offer a small rate—typically 0.01% to 0.05% per year—but the amount you earn is usually measured in dollars per month, not hundreds.
The reason is simple: banks use your deposits to lend money to other customers and businesses. They keep the difference between what they pay you and what they charge borrowers. On a business checking account, the bank pays you almost nothing because they expect you to use the account for cash flow, not savings.
If you want your business money to earn interest, you need a different account type—usually a money market account or business savings account—which typically pay higher rates but limit how often you can withdraw.
Key Takeaways
- Most business checking accounts pay zero interest, and those that do pay rates between 0.01% and 0.05% annually.
- Interest is calculated on your average daily balance and posted monthly or quarterly, depending on the bank.
- You earn more interest by keeping a higher balance, but most businesses use checking for operations, not savings.
- Money market accounts and business savings accounts pay higher rates if you want your money to grow instead of just sit.
- Interest rates change based on the Federal Reserve's decisions, so what your bank pays today may be different in six months.
How banks calculate interest on business checking
When a bank does pay interest on a business checking account, they calculate it using your average daily balance. This means they add up what you had in the account each day of the month, then divide by the number of days. If you had $10,000 for 15 days and $5,000 for 15 days, your average daily balance is $7,500.
The bank then multiplies that average by the annual interest rate and divides by 12 (or by the number of days in the period, depending on how they calculate). So if your average daily balance is $7,500 and the rate is 0.05% per year, you earn about $3.13 per month.
Interest is usually posted to your account monthly or quarterly. Some banks post it daily but hold it until the end of the period. You can see the exact calculation method in your account agreement or by asking your bank directly—different banks use slightly different formulas.
When interest rates on business checking change
The interest rate your bank pays on business checking moves when the Federal Reserve changes its benchmark rate. When the Fed raises rates, banks eventually raise what they pay depositors. When the Fed cuts rates, banks cut what they pay you. The lag is usually one to three months.
Your bank can also change rates on its own, independent of the Fed. They might lower rates to save money or raise them to attract new business customers. Check your account agreement for the bank's policy on rate changes—most require them to notify you before a change takes effect, but the notification may come via email or your online portal.
If you have a promotional rate—a higher rate offered for a limited time—that rate will drop to the standard rate once the promotion ends. The bank will tell you when this happens, usually 30 days in advance.
Why business checking pays less than savings accounts
A business savings account or money market account typically pays two to ten times more interest than business checking. The reason is that these accounts limit withdrawals. Federal rules once capped savings account withdrawals at six per month; those rules have loosened, but the principle remains: accounts you can't touch as often pay more.
Business checking has no withdrawal limits. You can move money in and out as many times as you need for operations. That flexibility costs you in interest. Banks know you need access to the money, so they pay less for it.
If your business has cash you won't need for operations for at least 30 days, moving it to a money market account or savings account can earn you noticeably more. Some businesses keep a small checking balance for daily transactions and a larger savings balance for reserves.
How to find a business checking account with better interest
Online banks and credit unions typically pay higher rates on business checking than traditional brick-and-mortar banks. Online banks have lower overhead costs and pass some of that savings to depositors. Credit unions are member-owned and often prioritize paying members more on deposits.
Rates vary widely. One bank might pay 0.01% while another pays 0.10% on the same balance. Over a year, on a $50,000 balance, that difference is $45—not huge, but worth checking if you keep a large balance in checking.
Before switching banks, confirm that the new bank offers the features you need: mobile deposits, ACH transfers, wire capabilities, and integration with your accounting software. A slightly higher interest rate doesn't matter if the account is harder to use for your business.
Interest on business checking versus other account types
| Account Type | Typical Interest Rate | Withdrawal Limits | Best For |
|---|---|---|---|
| Business Checking | 0% to 0.05% | Unlimited | Daily operations and cash flow |
| Business Savings | 0.01% to 0.50% | Limited (varies by bank) | Short-term reserves |
| Business Money Market | 0.05% to 1.00% | Limited (varies by bank) | Medium-term reserves with occasional access |
| Business Certificate of Deposit (CD) | 0.50% to 5.00% | None until maturity | Money you won't need for 3 months to 5 years |
The rates shown are examples and vary by bank, location, and current economic conditions. Rates change frequently, so check with your bank for current offers.
What to do if your bank pays no interest on business checking
If you keep a large balance in a business checking account that pays zero interest, you're losing money to inflation. A $100,000 balance earning nothing loses purchasing power every year as prices rise.
Consider splitting your money: keep one to three months of operating expenses in checking for immediate needs, and move the rest to a business savings account or money market account. This keeps cash available for emergencies while earning interest on reserves.
Some banks offer tiered rates, meaning they pay higher interest on larger balances. If your bank does, ask whether you're on the right tier for your balance. You might also ask whether they offer a business money market account with a higher rate—many do, and you may not have seen it because you didn't look beyond checking.
Frequently Asked Questions
How much interest will I earn on a $50,000 business checking balance?
At 0.05% per year, you'd earn about $25 annually, or roughly $2 per month. At 0.01%, you'd earn $5 per year. The exact amount depends on your bank's rate and how they calculate average daily balance. Check your bank's current rate to get a precise figure.
Does interest on business checking get taxed?
Yes. Interest income is taxable business income and must be reported on your tax return. Your bank will send you a 1099-INT form at the end of the year showing how much interest you earned. Keep records of all interest deposits for your accountant.
Can I move money between checking and savings to earn more interest?
Yes, you can move money as often as you want between your own accounts. However, if you move money to a savings account or money market account, that account may have limits on how many withdrawals you can make per month. Check your bank's rules before moving money you might need quickly.
What happens to my interest if I close the account mid-month?
You typically earn interest through the last day the account is open. Your bank will calculate interest based on your average daily balance for the full period, including the day you close it. Interest is usually posted within a few days after closing.
Why did my bank lower the interest rate on my business checking?
Banks lower rates when the Federal Reserve cuts its benchmark rate or when they decide to reduce costs. You'll usually receive notice 30 days before the change. If the new rate is too low, you can move your account to a bank offering better rates.