Do Business Checking Accounts Earn Interest?

Meow Technologies, Inc.

Meow Technologies, Inc.

Business checking accounts have traditionally been used for basic banking needs such as making deposits and writing checks. They have not been known to be interest-bearing accounts. However, with changes in banking technology and priorities, more options are emerging for small business owners to earn interest on their checking account balances.

In the past, most traditional, brick-and-mortar banks did not pay interest on business checking accounts. Interest earnings were reserved for savings accounts, certificates of deposit, and other bank products aimed at consumer savings. Business checking was purely for transactions. However, online banks and financial technology companies have disrupted this model by offering business checking accounts with much higher interest earnings than previously available.

What Is High-Yield Business Checking?

High-yield business checking accounts are a relatively new offering that allows businesses to earn interest on their checking account balances. The "high-yield" designation means that these accounts pay a higher annual percentage yield (APY) interest rate versus standard business checking accounts. Many purely online banks and banking platforms now offer business checking accounts with APYs over 1%.

By comparison, many traditional bank business checking accounts either do not pay interest at all, or they pay a very minimal percentage yield, often less than .1%.

If you use Meow to apply for a checking account from FirstBank, a Tennessee corporation; Member FDIC, you'll receive up 5.02% APY (subject to rate sheets, as of 1/23/24. Meow is a financial technology company, not a bank).

The higher interest rates offered by some online banking options provide more incentive for businesses to park cash they need for regular operating expenses in their checking accounts versus a separate savings account or other bank product. High-yield business checking accounts essentially allow small businesses to earn passive income on the money they need access to for monthly transactions and bills.

What Are the Requirements?

To earn the high-yield APYs advertised by banks and online platforms, business checking accounts often come with certain conditions. The most common requirements are:

  • Maintaining a minimum account balance - The level can vary greatly among banks from a couple thousand dollars to over $100k or more.
  • Making a certain number/dollar amount of transactions per month - This ensures an active account versus just using it as an interest-bearing savings account.
  • Receiving a certain amount in customer payments per month - Some require thousands in customer payments to qualify for the highest interest earnings tier.

Are There Interest Rate Caps?

In addition to requirements, most high-yield business checking accounts also place limits on how much money can actually earn the advertised APY. The caps prevent businesses from just shuffling excess cash into their checking accounts.

For example, an account may pay a 3% APY, but only on balances up to $100k or $250k. Any amount over that cap would earn little to no interest. Many high-yield business checking accounts have caps in the $100k-$500k range. So you can benefit from the high interest rates, but only up to a point.

Some banks offer uncapped business checking accounts, which pay high rates on million-dollar-plus balances with no limit. However, the qualifications may be tougher for these accounts.

What About Taxes?

Another thing to keep in mind with business checking accounts that bear interest - the earnings are taxable. Any bank will issue you a 1099-INT form at year-end documenting the interest paid to you. Even if you reinvested the monthly interest earned back into your account all year, you must still pay taxes on it. Interest income flows through to your business income tax return.

So be sure to discuss with your accountant to understand the implications for your particular business's tax situation. You don't want to get caught off guard with a higher-than-expected tax payment due to interest income from your bank accounts.

Benefits of High-Yield Business Checking

Assuming your business can qualify for a high-yielding account and tolerate the tax implications, the benefits can be significant:

  • Earn higher interest versus a standard business checking account
  • Maintain liquidity versus tying up funds in CDs or other savings vehicles
  • Consolidate cash in a single account instead of splitting between checking and savings
  • Potentially reduce fees if the account has lower monthly maintenance charges or minimum balance requirements versus alternatives
  • Enjoy convenience features like online account access

What Are Some Alternatives?

While interest-bearing business checking accounts offer tempting yields these days, they are not equivalent to investment returns. And they may not match the rates or accessibility provided by some other bank account types:

High-Yield Business Savings Accounts

These savings accounts pay interest using tiered rates based on your balance - the higher the balance, the higher the interest rate. However, business savings accounts limit monthly withdrawals and charge heavy fees for exceeding them. So accessibility is restricted.

Certificates of Deposit

Also known as CDs, these are locked, fixed-term accounts, ranging from 3 months to 5+ years. You agree not to touch your principal for the entire term in exchange for earning a higher guaranteed interest rate. CDs often pay better rates than even high-yield checking, but are much less liquid. Early withdrawals incur stiff penalties.

CD Laddering

You can increase liquidity by "laddering" CDs, spreading money across accounts of varying terms. This staggers maturity dates so some become available regularly while still earning high rates. It requires large upfront deposits though and carries early withdrawal fees if you absolutely need the money.

Money Market Accounts

MMAs earn interest like savings accounts and allow check writing/debits like checking accounts, but with the latter having limits per month.

Credit Union Share Accounts

Credit unions may pay higher deposit rates than banks. However, membership eligibility and access to branches are more restrictive versus purely online options.

How to Choose the Best Account for You

With all the options now available to earn interest on checking account funds, how do you choose what works best? Here are key considerations:

Daily Transaction Volume

Do you need to run high volumes of payments and transfers in and out daily? Can you keep volumes lower? Transaction volume requirements may factor into eligibility for some high-yield accounts.

Accessibility of the Funds

Do you need instant liquid access at any given moment to all the cash in the account? Or is locking up portions for fixed periods in CDs a possibility? Less liquid options may be able to earn more interest.

Interest Rate Target

Are you maximizing interest earnings above all else? Or do you need at least a minimum baseline yield while keeping funds accessible regardless? This governs whether you need the highest-yield account possible or one that guarantees a good rate despite lower balances or activity.

It is admittedly far more complicated for small businesses to earn interest on operating cash balances than just a few years ago! But with smart research and planning, you can now generate substantial passive income on the money sitting in your business checking accounts. Just be sure to understand all the requirements, rate caps, and tax implications before you dive into one of these high-yield accounts.

Apply Now

Click the button below to apply for a business checking account from FirstBank, a Tennessee corporation; Member FDIC. The application generally takes less than 10 minutes to complete.

Further Reading

If you already have a business checking account and you are exploring alternatives, take a look at the following article: Making the Switch: Changing Business Bank Accounts

To learn more about the key benefits of business checking accounts, check out the following article: Key Benefits of a Business Checking Account


Meow Technologies is a financial technology company, not a bank or FDIC-depository insured institution. Likewise, Meow Technologies is not an investment adviser and none of the information presented herein should be relied upon as financial advice or a recommendation to make any financial decision nor should it be considered to be tax or legal advice. The information is the opinion of Meow Technologies for educational purposes and may not be suitable for all companies. Products, like the one described herein, are offered through Meow Technologies and are not advisory services which are only offered through Meow Advisory, LLC.** The FDICs deposit insurance coverage only protects against the failure of an FDIC-insured bank.**

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Meow currently partners with three banking providers. Banking services are provided by Third Coast Bank SSB; Member FDIC, Grasshopper Bank, N.A; Member FDIC, and FirstBank, a Tennessee corporation; Member FDIC.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Grasshopper Bank, N.A, you deposit your funds into a deposit account at Grasshopper Bank, N.A. which sweeps those funds into deposit accounts across a network of Federal Deposit Insurance Corporation (“FDIC”)-insured banks, for up to the current standard maximum deposit insurance amount (“SMDIA”) of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including Grasshopper's ICS Deposit Placement Agreement. Grasshopper Bank, N.A. uses a third-party vendor and agent to help administer this sweep process. Visit https://www.intrafi.com/network-banks/ for a list of the banks and savings associations with which we/Grasshopper, N.A. have a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Grasshopper, N.A. or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of Grasshopper Bank, N.A, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheets for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by Third Coast Bank SSB, you deposit your funds into a deposit account at Third Coast Bank SSB. If you also hold funds in a sweep program with Third Coast Bank SSB, Third Coast Bank SSB sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per receiving bank, for each ownership capacity or category, including any other balances you may hold at that receiving bank directly or indirectly through other intermediaries, including broker-dealers. Third Coast Bank SSB uses a third-party vendor and agent to help administer this sweep process. Visit Third Coast Bank SSB for a list of the banks and savings associations with which we/Third Coast Bank SSB have a business relationship for the placement of deposits at receiving banks, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by Third Coast Bank or you). The current maximum deposit insurance amount for your funds is up to $50 Million in FDIC insurance through the sweep network of Third Coast Bank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and conditions and refer to the applicable rate sheet for additional information.

By opening a Maximum Checking account through Meow and if you choose to receive banking services provided by FirstBank, a Tennessee corporation, you deposit your funds into a deposit account at FirstBank, which sweeps those funds into deposit accounts across a network of FDIC-insured banks, for up to the current SMDIA of $250,000 per eligible depositor, per destination institution, for each ownership capacity or category, subject to applicable terms and conditions, including FirstBank's ICS Deposit Placement Agreement. FirstBank uses a third-party vendor and agent to help administer this sweep process. Visit IntraFi for a list of the banks and savings associations with which FirstBank has a business relationship for the placement of deposits at destination institutions, and into which your deposits may be placed (subject to applicable terms with you, and any opt-outs by FirstBank or you). The current maximum deposit insurance amount for your funds is up to $125 million in FDIC insurance through the sweep network of FirstBank, subject to change at any time with notice from Meow and/or pursuant to applicable law. Terms and restrictions apply. Subject to applicable rate sheet. Interest rate on checking products quoted in Annual Percentage Yield (APY). Interest rates and yields are effective as per the date on the applicable rate sheet. See applicable terms and restrictions and refer to the applicable rate sheet for additional information.

***FDIC insurance coverage is only available to protect you against the failure of an FDIC-insured bank that holds your deposits (and does not protect you against the failure of Meow or other third party). Your account with Meow and all services provided to you are subject to the Meow Terms of Service (“Account Agreements”) and other applicable terms and no other representations or warranties, express or implied, are provided to you except as expressly set forth in those written Account Agreements. If you have any questions regarding your account, please contact team@meow.com.

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FirstBanks general policy is to allow you to withdraw funds deposited in your account on the first business day after the day we receive your deposit. Funds from electronic deposits will be available on the day we receive the deposit. In some cases, we may delay your ability to withdraw funds beyond the first business day. Then, the funds will generally be available by the SECOND business day after the day of deposit.