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Commercial Spotlight: Breaking Down Deposit Options To Save

by Melinda M. Toy, CTP

PyraMax Bank's Commercial Banking team are dedicated to finding solutions for your small business. In this article, we'll break down some of the different options available to your institution, so that you can make the most of having a Commercial Deposit Account.

What is a Commercial Deposit Account?

When it comes to types of deposit accounts and options for savings, there is more than meets the eye. This series is dedicated to breaking down deposit accounts, how they work and options for housing deposit funds to help you make the most of your money.

A deposit account is an account at a financial institution--bank or credit union most commonly--that allows you to deposit and withdraw your money. Savings and checking accounts are the most common and can be either a demand or time deposit account. Demand deposit accounts can be basic checking or savings accounts that allow you to deposit or withdraw funds as frequently as you’d like so long as funds are available. Another common demand deposit account is a money market account. Funds are also liquid in a money market like a checking or savings account, but the money market account is limited to six transactions per month.

Traditionally, deposits in savings and money market accounts generally earn more interest than those in checking.

Time deposit accounts include certificates of deposit (CDs) and IRA CDs. These are interest-earning accounts that commonly offer better rates than regular savings accounts, but you must keep your money in the account for a set time or pay early-withdrawal penalties. The type of deposit account that works best for you depends on a number of factors, including how you want to access the money and how often.

Security for Deposit Accounts

When deposited into an insured financial institution, your money is protected up to $250,000 per account by the Federal Deposit Insurance Corporation (FDIC), or up to $250,000 per credit union account by the National Credit Union Administration (NCUA). You can find out if the bank you’re considering is insured by the FDIC here.

For insurance security for funds over $250,000, the Certificate of Deposit Account Registry (CDARs) and Investment Cash Sweep (ICS) options exist, which will be discussed in a future blog.

Types of Deposit Accounts

Checking Accounts

A checking account allows you to safeguard, track, and easily use your money. Checks, electronic payments, transfers between multiple accounts, debit card usage are ways to access funds in a checking account. Some checking accounts pay interest, but the majority do not. To earn higher interest a money market CD is a better tool. Customers should ask for their bank’s fee schedule to review costs associated with transaction on accounts. Banks typically have various account types depending on needs and activity level. Many times basic checking accounts are available without fees or limited underneath a certain transaction limit. As checking account usage and bank’s service of them requires more products and resources, fees may be higher, but can be offset by higher balances. Most banks reward business customers through a credit to their transaction fees the higher the balance they keep.

Savings Accounts

A business savings account pays interest on funds deposited. Interest may be compounded daily, weekly, monthly, or annually. The benefits of savings accounts can vary widely based on requirements for a minimum opening deposit, fees, and how interest is calculated on the rate paid. Savings accounts don’t offer the flexibility of checking accounts.

The federal government has established regulation to keep the focus for this account on savings. The Fed established Regulation D which limits certain transfers and withdrawals to six transactions per month. If this number is exceeded, the bank may charge a fee, close account or transfer it to a checking account type.

Money Market Accounts

A money market account is a high-yield deposit account with an interest rate tied to an index. The index used can differ between financial institutions, and they can set and change rates at any time. Rates on these deposit accounts may or may not be higher than those offered on savings accounts, and as with savings accounts—however, in general, they typically are.


A certificate of deposit (CD) provides a money-saving option typically at higher interest rates on savings accounts. Interest rates are fixed over the term of the CD, which can be a few weeks, months or several years. CDs may automatically renew upon maturity, so it is important to know the rules of your financial institution if you want the option to withdraw at the end of your term.

CDs are a time deposit, which means money cannot be withdrawn without penalty prior to maturity. Penalty rates vary across banks and depending on CD term length. The sooner you withdraw, the larger the penalty typically. A customer may lose months to entirely all the interest earned if they withdraw funds prior to maturity.

Deposits can be insured by participating institutions up to $250,000 via FDIC (for banks) or NCUA (credit unions). Larger principals and longer terms may fetch the more competitive rates, but please, be sure you can go without access to your money for the duration of the CD term, lest the penalties you incur chew up your earnings and defeat the purpose of putting money in a CD in the first place.

How Deposit Account Rates Work

The deposit funds placed in banks and other financial institutions are used to fund loans to other customers. As we’ve seen above, from savings to money market to CDs, banks reward customers for keeping these funds in their bank. The longer and higher the funds are in the account, the more earned interest in the bank, the greater the amount of compound interest the account will earn in the following period.

Compound Interest

The interest paid on deposit accounts is compounded based on the total balance on a quarterly, monthly, weekly or daily basis. The more often interest compounds, the faster your fund balance increases. The APY provides the amount of interest your account will earn in one year. Banks vary on how often their select accounts compound, and is a good way to compare accounts.

Which Account to Choose?

Depending on your goals, need for availability to cash and savings goals, hopefully you can see you have a number of options to save and secure your business funds.  The right mixture of accounts can help you maximize your funds and reward you for your funds at your bank.

Check out PyraMax Bank's account offers and contact your Treasury officer today to help you customize a solution to get your best return on your money at 414-235-5897.

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