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One of the most important things to do when you start a business is open a business bank account. Obviously, you want to separate business transactions from personal ones so that you can easily track payments and receipts from vendors, suppliers and others you work with. The problem comes about when you want to open an account but are spoilt for choice. There are so many companies offering business bank accounts in the US that it is difficult to just pick one. But pick you must, and this guide should help you find the best account for you and your business.
Since you’re reading this, you have probably already made up your mind about opening a bank account for your business. For those still contemplating whether or not they need one, here are a few reasons why. Firstly, you will make your life a lot easier come tax season. Unless you’re planning to dodge taxes, you intend to be open about all your transactions, but this can become messy if the transactions are intertwined with your personal expenses. Even the best accountant will have a hard time sorting through everything and that will cost you a lot more.
Second, you won’t be able to get a business loan if you don’t have a dedicated bank account for your business. And now the big one, you might be sued personally if you don’t keep things separate in case of anything. Any of your peers will tell you the same thing, get that business bank account ASAP, for these reasons and more.
The good thing about having a lot of choices as you do is that you can choose what’s best for you. There are many banks offering business bank accounts in the US, and although their services may seem a bit similar at first, there are a lot of differences that can affect your business. Let’s see some of the things that could prompt you to pick one bank over another.
How many transactions do you expect to process in a day, week or month through your business? The question here is not really about the number or frequency of transactions but how much these will cost you. There are no actual free business bank accounts because the bank still needs to make money. The best banks will give you a certain number of free transactions per month and then start charging for the rest.
This is the sort of thing you need to keep in mind when you’re thinking about the number of transactions you expect from your business. A small company handling a few transactions a month could save a lot when using a bank that offers free transactions for the first few of them. In the best case, you might not even pay any transaction charges for the month.
Typically, banks that offer a few free transactions and then charge for the rest during the month will have higher fees. Perhaps to try and make up for the missed payments. Meanwhile, banks that absolutely don’t have free transactions will have to keep their fees low throughout. If your company has many transactions in a month, then it would be best to choose that bank with low fees throughout.
By considering how many transactions you can expect within a given time period, you will be able to make the best decision.
Most banks will have a minimum balance requirement when you want to create a new business checking account. Banks depend heavily on the amount of their client deposits so that they can lend to other clients or invest elsewhere. Governments don’t loan banks. Because they need to increase their own reserves, most banks will set a minimum deposit requirement when opening a business bank account.
In general, the higher the minimum balance requirement, the lower the cost of operating that account. Think of yourself as the bank’s partner – if you give them more money to invest, they offer you better rates. Knowing this, even a small business owner may opt for the bank with a higher minimum deposit requirement if they expect to have many transactions and would like to save on those charges.
Some banks will even go the extra mile to offer a bonus if you open an account with a certain minimum balance and maintain it that way. While that may not be your priority at this moment, it wouldn’t hurt, would it?
Apart from just reaching a specific threshold just to get an account, banks also expect you to maintain a certain bank balance. It takes a lot for a bank to maintain everything in order. If you’re just keeping your money parked in the account, then the bank isn’t making anything from transaction fees, ATM fees, etc. This is why they charge a fee if you fall below this average balance.
Once again, you have to be aware of how much money you keep in the bank on average and the fee for going below. The general rule of thumb is that the higher the average, the lower their other charges. So, you have to balance between your situation and the costs.
Is your business more cash or online based? In the case of the former, you may want to find a bank that has a physical branch within your location. That way, you will be able to make quick cash deposits when needed. However, if you’re running a mostly online business, then this should not be priority. You will even save money on the fees charged for cash deposits (if any).
Let’s say you run an online business and payments are made via PayPal, how well would a business bank account integrate with the system. There are many other similar systems and even accounting software used nowadays, and it is better if they can synchronize with your account.
Big banks are often imposing and detached while smaller local banks are the opposite. For example, you will find local bank staff more willing to be flexible when it comes to requests like loans. On the other hand, big banks have thousands or even millions of clients and can’t afford to tailor-make deals for some customers. This is a trade-off you would have to make when you want a business bank account.
Is the grass greener? Some of you may be feeling frustrated by their current bank and want to make a switch. There are only three reasons why you should do so, or otherwise don’t. one reason is a change in business operations. As your business grows or diversifies, its needs will change and one of those changes may be the business bank account. Alternatively, you may have made the wrong choice before and want to correct it, or a better option came along. Other than that, you are always advised to stick to your current bank. Doing so makes it easier to get loans and credit cards, and you don’t spend money performing the transfer of funds.
As mentioned before, there are very many banks in America, but you can now choose from only 10 of them. These business bank accounts have been categorized into 5 categories based on the considerations you may have.
When you’re running a business that is operating online primarily, you really need a bank account that will fit your style. Inasmuch as most banks provide online banking, some have made it a specialty and created the complete package.
This bank was among the first to become a digital bank when it was first formed in 1999. Over the years, it has grown to become one of the top providers of personal and business bank accounts online. You can choose between checking, savings and CD accounts. The basic business checking account has a $1,000 minimum opening balance and no monthly fees, which is ideal for a small business based online. For a larger online business, the business interest checking account is available with only a $100 opening balance but a $5,000 daily balance requirement. It is great for someone who would like to earn interest (0.80%).
With even more option for larger businesses or savings, there is no shortage of options at Axos Bank. All these account options will allow you to perform all the basic functions of an online business that you would ever need.
Axos Bank may be among the top digital banks, but it is certainly not the most affordable. TIAA is what you need when you are starting a small business and want to minimize expenses. An account from TIAA requires just $25 to open and the whole process can be done online. With an operating balance of just $25 in your account, you won’t be charged any monthly fees, and they will even reimburse you for any ATM fees charged by other banks. All these services are incredibly affordable, making it one of the most affordable business bank accounts in the US.
While banks will never offer truly free bank accounts for business, some have lowered the fees to almost nil. The two best options for entrepreneurs who want to save on costs are:
If you have a business with a lot of activity, it is important to choose a bank with low fees and save on costs. US Bank is therefore one of the best for this purpose. Charges are extremely low, with 150 free transactions and 20 mobile checks per month, after which you will be charged only $0.50 for each transaction. They also have other great services, so you won’t really be compromising on anything, even online banking. Considering that they have thousands of branches around the country, this is one of the best choices for physical transactions.
While US Bank is best for a physical business, Azlo is what you need when you have an online business. They advertise for being a no-fee bank where you won’t be charged transaction or maintenance fees nor do they have a minimum opening balance. The only downside is that they are a digital bank so you can’t, say, make cash deposits, but all other services are excellent.
Most startups tend to handle a lot of transactions, but their value is smaller. For such an entrepreneur, it is important to get a reliable bank with low fees.
Chase Bank has about 5,000 branches around the US and over 16,000 ATMs, making it favourable for your business. The first 100 transactions are free, all electronic deposits like mobile checks and up to $5,000 in cash deposits. The minimum daily balance is $1,500, below which the monthly fee is just $12. These features make it best for a startup handling many transactions. You will also get debit cards for you and your employees as a nice perk.
With just $25, you can open a business bank account with Wells Fargo online quickly. After that, just maintain a $500 minimum balance and you can avoid any maintenance fees. If not, it will only cost you $10 per month. Startups will enjoy their loan program and other nice benefits.
Operating a business with a huge volume of transactions requires the least transaction fees as these can add up over time and become a burden.
At just $15 service fee per month, Capital One will not charge you for any transactions within the month. Even without the monthly service fee, you still get up to $5,000 deposits a month for free. If you surpass this limit, you’re only charged $1 for every $1,000 worth of deposits.
This bank has tailor-made accounts for businesses with a lot of transactions, and you can choose between per-transaction charges or monthly fees. Either way, the charges are very low, and can even be avoided altogether if you just maintain a high account balance.
Once your business has grown and processes a lot in value of transactions, you will need a different set of services.
To cover all monthly fees, you will be charged $18, but this can be completely avoided if you maintain a $5,000 monthly balance and a $3,000 daily balance. Cash deposits are charged $0.30 for every $100 until $7,500, which is not too high. Being one of the big four banks in the US, it’s business bank accounts are favorable to any business that handles many transactions in cash. Bank of America will even offer rewards similar to reward points for spending on credit cards, all of which will be advantageous for established businesses.
Their services and charges are very similar to those offered by Bank of America, and may even be interchangeable. The choice is really a matter of personal preference, but with the advantage of offering 250 free transactions per month.
