Capital One Spark Business Checking Account Review
When opening up a small business, one of the more crucial accounts you’ll need is a high yield savings account. Depending on your cash flow, spending habits, inventory needs etc, a typical small business could have anywhere between $500 and $500,000 in cash earning interest. The Capital One Spark Business Savings Account is one of the better business savings accounts around and we’ll take a look at how it can help (and possibly hurt) your small business.
Spark Interest Rate
For the first year, all new Spark Business Savings account holders will earn an APY of 1.75%. This interest rate is one of the best you’ll find for a business savings account and it makes the account very attractive right out of the gate. The problem however is that after the first year, the APY reverts to a standard 0.40%.
To show you the difference between these two interest rates, let’s assume you have $100,000 tucked away for the first year. With interest compounded daily at 1.75%, you stand to earn $1,760.48 during the year. With interest compounded daily at 0.40%, you stand to earn just $400.80. There’s a stark difference between the two and the more you deposit, the greater the difference between them.
Considering the rate is so strong for the first year, Capital One is inviting you to open an account and give them a chance to earn your business long-term, even with the reduced rate. It’s a bet they would lose with my business, but for one year, I’d certainly give them a shot.
Capital One Small Business Fee Structure
The fee structure for the Capital One Spark Business Savings Account is straightforward:
- Minimum deposit to open the account – $0
- Monthly service fees – $0
- Overdraft fees – N/A (You are not allowed to overdraft the account, so no fee can be given).
- Cash deposit fee – Each month, you can deposit up to $5,000 in cash for free. However, each additional $1,000 you deposit in cash will cost you $2.00.
- There is a limit of 6 withdrawals per month. Capital One might let you get away with making more than six in a single month, but if you do this frequently, they may close you account.
- Incoming and Outgoing domestic wire fee – $15 per incoming transfer and $25 per outgoing transfer.
I don’t have a business that deals in cash, so I was surprised to learn of the cash deposit fee. When looking around at other big bank small business accounts, I see that the fee of $0.20 per $100 deposited is pretty common. That kind of fee (2% essentially after the first $5,000 per month) would wipe out the benefit of the interest earned in the savings account.
If you have a business that regularly needs a cash deposit, this is likely not the account for you.
Small Business Added Features
Beyond the interest rate and fee structure of the Capital One Spark Business Savings Account, Capital One also boasts about the other small business products they offer. Each can be linked with a savings account to provide your business yet another very necessary financial tool.
If you’re business is in services or retail, you’ll need the ability to accept credit card payments and you’ll need a reliable processor. Capital One steps up by offering competitive processing fees (which vary based on your business size) and a discount on the first year.
- Earn a 0.05% processing fee discount for up to 12 months when you have a balance of at least $25,000 in a Capital One business checking account.
- Earn a 0.15% processing fee discount for up to 12 months when you have a balance of at least $100,000 in a Capital One business checking account.
Capital One offers small business the opportunity to set up 401(k) plans for their employees. You can set up a customized 401(k) plan that allows employees to lower their taxes and save for retirement (up to 55k annually).
The Spark 401k:
- Aims to keep costs under 1% so more of your money stays invested
- Provides a simple and easy to manage retirement solution
- Has been in business for 12 years serving over 5,000 businesses
Spark Credit Cards
Capital One Spark Cash – The Capital One Spark Cash offers a $500 cash bonus after you spend $4,500 in purchases during the first three months. The everyday cash back rate is 2% for all purchases; with no cash back limits or tier rates to worry about. Cash back never expires so long as your account remains active, and in good standing with Capital One.
The annual fee to own the Capital One Spark Cash is $95 but it’s waived for the first year. The purchase and balance transfer APR is 18.49% variable.
Capital One Spark Miles – New cardholders of the Capital One Spark Miles can earn 50,000 bonus miles after spending $4,500 in the first three months of account opening. 2x miles are earned on every purchase and there is no limit to the amount of miles you can earn. Miles will not expire as long as your account remains in good standing.
The annual fee on this card is $95, but it is waived for the first year. Both the purchase and balance transfer variable APR is 18.49%
Notice the similarity between these two cards. Identical in the pricing details, bonus and rewards program. One offers cash, the other miles. Both high quality credit cards that would benefit any small business.
Capital One is looking to get you through the door with the promise of a terrific interest rate. Once you’re there, they’ll give you the products, service and technology to keep your business running smoothly, without gouging you in fees and unnecessary penalties.
However, it cannot be overlooked that the savings account interest rate drops 135 points after your first year, which makes the account so much less attractive. I hope that in the very near future, Capital One addresses this and considers increasing this savings account interest rate to over 1.00% beyond the first year.
For now, this is a terrific first year option for any small business. I can give my own stamp of approval on the Capital One Spark Cash; I use it for almost every business purchase and have saved thousands of dollars in cash back.
Learn more about the Capital One Spark Small Business Savings Account