Paying Interest on Business Account

Start with Reg Q, which forbids the payment of interest on demand deposit accounts. Then look to Section 204.130 of Reg D, which provides a list of persons eligible for NOW accounts. After sifting through that, what develops is a prohibition against paying interest on most businesses' checking accounts. That's because a business can't have a NOW account and the only other kind of checking account is a demand deposit account, which can't earn interest. Businesses are permitted to hold other forms of deposit accounts, such as money market deposit, savings and time deposit accounts, all of which can pay interest.

First published on BankersOnline.com 11/19/07