Commercial Deposit Accounts (CDA)

Сommercial deposit accounts are designed to help businesses seamlessly and efficiently manage their money.

Checking Accounts

A checking account is a special account of a legal entity or individual entrepreneur intended for storing funds, as well as for settlements and payments related to entrepreneurial activities.

The purpose of payments is the main difference between a current account for entrepreneurs and a bank account of an individual. To identify the client, the bank assigns him/her an individual account number. For the organization, this number is an important part of the bank details.

For individual entrepreneurs, a current account is a convenient tool for doing business. The current account can receive proceeds, it is easy to pay for goods and services (for example, rent), taxes and contributions to government funds from it.

What is a checking account used for?

To understand why an entrepreneur needs a current account, consider what it is used for. A current account allows its owner to:

• hand over the proceeds to the bank and keep it in a non-cash account;
• accept non-cash payments from partners and customers (including through the acquiring system);
• pay for goods, materials, rent, services provided to the business;
• transfer employees’ salaries to bank cards;
• pay taxes, contributions to the Pension Fund and State Compensation Insurance Fund.

Benefits of opening a checking account:

LLC does not have to think about whether to open a checking account or not. They are required to do so by law. Individual entrepreneurs have the right to choose, so they try to weigh all the pros and cons, correlate the benefits with the costs.

More and more individual entrepreneurs decide that it is necessary to open a checking account since it has a number of advantages:

• it is convenient to pay taxes and contributions to funds;
• you can conclude contracts and agreements for a large amount;
• raising the status, entering the market of larger partners;
• when connected to Internet banking, all payment transactions can be made from home;
• the ability to use merchant acquiring.

Savings Accounts

A savings account is an open bank account that offers not only interest from keeping funds but also the ability to withdraw part of the deposit without losing them at any time.

A savings account resembles a demand deposit, but the rates are higher. At the request of the client, it can be replenished or withdrawn at a convenient time. As in the case of a regular deposit, the funds in the savings account are insured by the state.

Features of savings accounts:

• The average level of profitability varies in the range of 4-6% per annum;
• Some banks introduce an additional condition – the requirement for the minimum amount on the account, for example, $1,000. In this case, in order to receive the interest declared by the bank, you must always have at least this amount on your account;
• Income as a percentage of the amount is usually credited to the client’s bank account on a monthly basis;
• Opening a savings account is beneficial for those who plan to spend savings on their own needs. There is no link to the timing of receiving money, so savings can always be used.

Benefits of a savings account:

• The percentage is higher than on demand deposits, while you can withdraw part of the funds without closing the account;
• Compensation of funds in case of bankruptcy of a financial institution;
• Opens for an indefinite period;
• Some financial institutions allow capitalizing the accrued interest, that is, income in the form of interest on the account is transferred to the same account, thereby increasing the amount on the account. In the next month, the client will receive a higher income since the amount has increased.

Disadvantages:

• To receive an increased annual rate, you need to deposit a large amount on the balance;
• If there is a requirement for the minimum amount, it is necessary to “freeze” it on the account and make sure that it does not decrease – otherwise, the bank will transfer the client to a reduced percentage (up to 0.01%);
• Some banks prescribe a floating interest rate in the agreement, so the investor cannot count on a constant income;
• Interest rates on the account depend on the balance: the larger it is, the higher the yield;
• Some banks establish their own rules for using the account, for example, by linking a debit plastic card to it, for the maintenance of which you have to pay a commission.

Certificates of Deposit

A certificate of deposit is a security that certifies the amount of the deposit made to the bank and the rights of the depositor (certificate holder) to receive the deposit amount and the interest specified in the certificate after the expiry of the specified period.

Certificates of deposit can be registered and bearer. They are issued only in documentary form.

The qualities of a certificate of deposit as a security give it a number of advantages over a deposit:

• a certificate of deposit has greater liquidity than a deposit agreement and can be resold;
• to transfer the rights under the bearer certificate to another person, it is sufficient to hand over this certificate to this person;
• the rights certified by the personal certificate are transferred in the manner established for the assignment of the claim;
• a certificate of deposit can be pledged, i.e. you can use it as collateral when conducting credit transactions with the bank.

Advantages of a certificate of deposit:

• simplified procedure for depositing funds: no account opening required;
• no tiresome paperwork involved;
• fixed interest rate – it’s unchanged during the entire period of placement of funds;
• a simplified procedure for drawing up an agreement on the assignment of a right of claim;
• the ability to receive funds and interest on a certificate of deposit at any bank office, regardless of where the certificate was issued.

Interest rates on a certificate of deposit depend on the term, deposit currency, and the amount of funds.