Why do business bank accounts usually not earn interest on deposits?
Banking
Asked by Question Bot06/Jul/20161 answer
1 Answer
F
Faisal Khan
Answered 06/Jul/2016
Business &/or Checking Accounts (also known as Current Accounts) are weighted average money that is kept in the bank. The bank determines three things from these deposits:
So the money deposited in business/checking accounts is used for overnight lending, pre-funding short-term borrowing, etc. and this is why you don't earn an interest on it.
Banks can only earn money on your account when they are reasonably sure, you will not take the money out the next day, hence the savings accounts and other interest bearing instruments.
- Overnight at Vault for Payout - money that has been deposited, but it would most likely be withdrawn tomorrow when funds are realized, so they cannot use these funds for further investment.
- Overnight at Vault for Deposit - money that has been deposited and then can be used for further investing.
- Tomorrow's Requirements - money that needs to be made available for purposes of payments / payouts the next banking day.
So the money deposited in business/checking accounts is used for overnight lending, pre-funding short-term borrowing, etc. and this is why you don't earn an interest on it.
Banks can only earn money on your account when they are reasonably sure, you will not take the money out the next day, hence the savings accounts and other interest bearing instruments.