Companies can finally earn interest on business checking accounts. The repeal of Regulation Q takes effect today. Regulation Q had prohibited banks from offering interest business checking accounts. This repeal is the result of last year's financial reform regulation (Dodd–Frank Wall Street Reform and Consumer Protection Act) which included this little-known provision.
As I described in my February post on best rates for business accounts, banks and credit unions have only been allowed to offer interest checking to sole proprietorships or non-profits. For all others, Regulation Q has prohibited banks and credit unions from paying interest.
In February I was hoping we would see some internet banks changing their rules to allow all businesses to open their interest checking accounts.
When I checked EverBank's website this morning, it still listed the business limitation on its Business Interest Checking (Sole proprietorships and non-profit organizations). However, I called and spoke with a business specialist, and she informed me that LLCs, partnerships and other businesses are now eligible to open this account. It seems they are a little behind in updating the website, but they are up-to-date on the new regulation.
EverBank's Business Interest Checking offers competitive rates especially for large balances. There is no monthly fee. However, like the personal account, there's a $8.95 monthly fee when you use online bill pay and when your average daily balance is under $5,000. For the Business Interest Checking, I was told there is a per item charge so each check you write will incur a charge. I could not see this mentioned in the fee disclosure. The Business Checking Account which pays no interest has no charge for the first 200 items per month.
There are not many other internet banks that offer interest checking for businesses. One is Ascencia Bank, but based on the bank's website, it appears the account is still just for sole proprietors.
According to Birmingham Business Journal large banks like Wells Fargo, BB&T and Regions say they will offer business interest checking. However, we all know the interest rates offered by those big banks will be so low that it won't be worth it.
In addition to the low interest rates, businesses have another reason not to want interest checking. Currently, there's a special FDIC provision that extends unlimited deposit coverage for 2 years on bank accounts that do not pay interest. For businesses with large balances, this unlimited deposit coverage will likely be more important than the little interest that they could earn with a business checking account.
Even though it may take a while before we see business interest checking accounts become more available, I'm encouraged by this change. The repeal of any regulation that inhibits banks from paying interest on deposit accounts is good news.