Part of the Dodd-Frank Wall Street Reform and Consumer Protection Act that is now in effect is a repeal of Reg Q, which had prohibited banks from offering interest on business checking accounts. Honor Bank welcomes this change for our customers, and intends to offer an account to allow you to take advantage of this opportunity.
A little history
Reg Q has been in effect since the 1930s. Many banks have gotten around the restriction by offering credits that are applied against the fees their corporate clients paid on treasury and other services (aka analysis checking accounts). In addition, most banks, including Honor, have offered NOW accounts, money market accounts and sweep to repurchase accounts. All these products, however, have made earning income on business deposits either complicated (i.e. analysis checking), or bound by restrictions (i.e. money market withdrawal restrictions).
How Honor Bank will respond
By the end of the year Honor Bank intends to offer a interest bearing business checking account.
Choices for businesses
Now that Reg Q is gone, moving from a non-interest-bearing account to one that offers interest may seem like a no-brainer. However, it may not always be the best move. For starters, interest earned is subject to taxes; the credits are not. What's more, through 2012, non-interest-bearing deposits of any amount are covered under FDIC insurance - interest bearing deposits are limited to $250,000 in coverage.
