What to look for in a business checking account
When you see an ad for a “free” business checking account, most of the time it’s not really “free”. After all, for these banks to keep going, they have to make money off of you somehow!
A top priority on our list was to include banks that offered competitive checking accounts for freelancers, small business owners, entrepreneurs, and growing businesses. Business checking accounts generally don’t give account holders the ability to earn interest and they charge slightly higher fees, so our list focuses on those banks that keep their fees to a minimum and also highlights those that offer interest.
However, it is important to always read the fine print before signing up for a new checking account. Here are the most important features to consider for a business checking account:
Balance and deposit requirements
Some banks charge a monthly fee if your company checking account balance falls below a certain threshold. It is calculated on an average per day, so as long as you maintain a certain level of money in the account, you will be fine. The bank may also require a minimum initial deposit, which may disqualify you from opening an account if you do not have the money.
On the other hand, some banks actually reward you for having a high balance, just like with a personal checking or savings account (usually with a higher interest rate). With business checking accounts, you can get a higher interest rate or even reduce (or eliminate) some fees by having a larger balance.
If you don’t see anything in the fine print about large balance bonuses, contact a service representative to see if they’re willing to give you a break if you agree to keep your balance above a certain amount.
Monthly maintenance fee
There is no monthly maintenance fee for every checking account. And those that require a monthly fee may offer account holders the option to waive the fee (usually by maintaining a minimum account balance). On average, these fees are usually $10–$15, but in some cases they can be as high as $50.
Before registering a business checking account, confirm whether a monthly service fee is charged. If yes, see if there is an option to waive the fee while maintaining a minimum account balance, or request a fee waiver.
Monthly transaction limits
With a business checking account, most banks set a limit on the number of transactions you make each month. Seems a bit retarded, doesn’t it? With a personal checking account, you are often encouraged to make unlimited transactions rather than limit them.
The limits set for account transactions also do not apply only to debit card payments. This usually includes things like deposits (both checks and cash), withdrawals, checks written, and payments you make electronically.
Most banks set a limit of up to 500 transactions, depending on the bank. However, on average, you won’t usually see a cap below 100 transactions per month. Expect fees to reach 50 cents per transaction above the cap. It’s like a 25% surcharge on a $2.50 coffee.
It is possible to find an unlimited number of transactions with a business account, but it is not so easy. Some banks may offer the option of unlimited transactions for a higher monthly fee, or you may find a bank that has no transaction limit at all. However, you will likely have to pay a higher monthly fee if you go this route. In addition, you can track your transactions and stay below the allotted amount every month to avoid paying any monthly fees.
What are the benefits of having a checking account for a business?
1. It separates your personal and business finances.
While you can technically (and legally) use a personal bank for your small business, this is not recommended.
This is because mixing them up can make it difficult to keep track of your income and expenses. And if you accidentally pay personal expenses from a business account, those expenses are tax-deductible and can distort your ledgers.
It is best to have a separate business-only bank account where you can do all your banking and ensure that it is kept separate from your personal finances.
Read more: How to separate personal and business finances (and why you need to)
2. It can help you manage your cash flow more effectively.
Cash flow is the blood of any business. If you cannot effectively manage your cash flow, your business will inevitably fail. That’s why it’s so important to find the best business checking accounts so you can keep track of your incoming and outgoing cash. With these checking accounts, you can easily keep track of your expenses and income, which can also help you get a loan for your business if needed.
3. It can help you build business credit.
One of the most important things you can do for your business is to build credit. When you have a good business loan, you will be more likely to get a loan or line of credit if you ever need it. It can also help you get better terms on these loans.
One of the best ways to build business credit is to open a business bank account. If you have a corporate bank account, it shows that you are running a legitimate business and helps build your credit history. If you’re thinking about opening a checking account, make sure you choose a bank that reports to the major credit bureaus so you can build your credit history every time you make a deposit.
Read more: How to build and establish a business loan
4. It may offer additional benefits such as rewards programs or the possibility of earning interest.
The best business accounts also often offer extra perks that can help your business. For example, some banks offer rewards programs that give you money back or points for every purchase you make. Others may offer interest-bearing accounts that can help you earn on your investment.
What is required to open a small business checking account?
There are a few requirements that you will need to open a business checking account, which may or may not include:
- Business license or constituent documents – The business account will need to be opened in the name of your business. That is why it is so important to have a business license or articles of incorporation handy.
- Your Employer Identification Number (EIN) – Your EIN is a nine-digit number assigned to a company, also known as a federal identification number.
- Government issued ID Your driver’s license usually meets this requirement.
bottom line
It doesn’t matter if you’re an established small business or a new blogger. If you have a business, you are a business owner. Thus, you must find one of the best business accounts on the market to separate your personal and professional finances.
Every business has different needs, and every bank account offers different services and features to meet those needs. Before you sign up for a business checking account, be sure to do your research. Look for details like fees and transaction limits. See if you can find an account that offers interest or cashback. Consider several options to find the account that works best for your business.
Featured Image: Cast Of Thousands/Shutterstock.com
