Business checking accounts are absolutely foundational. A business checking account lets you handle legal, tax and day-to-day issues. The good news is it’s fast and easy to set one up if you have the right registrations and paperwork ready. The somewhat more complicated part? There are a lot of banks and offers from which to choose. Here are some things to look for, whether you’re just starting out, or are looking to change your current bank for any number of reasons…along with tips to make the selection process a little easier:
Interest rates
Interest-generating business checking accounts have become pretty common. They’re popular because they allow business owners to rack up added income through interest accruing on their deposits. And while a business savings account may offer higher overall interest rates, as a stand-alone it lacks the daily liquidity you would most likely require. Bottom line: it doesn’t hurt to earn more interest wherever you can.
This is one place where your research can literally pay off. At the present time, online banks seem to have a clear edge, taking advantage of their digital (rather than physical) presence to offer higher interest rates due to lower overhead.
Service fees
Typically, business checking accounts will come with some kind of monthly charge that the bank refers to as a “service fee.”
These fees may range from $10-$30 per month. In many cases, though, banks that tout more attractive features charge an even higher service fee. Although you might decide that fees will not make a significant difference to you, free or low-cost alternatives can be found if you make a reasonably diligent search.
Banks may waive service fees if you meet other criteria like maintaining a minimum daily balance or signing up for another finance product. Regardless, not doing your research by thoroughly vetting banks could result in some unexpected fees that you otherwise might have avoided.
Minimum account balance fees
If your business has – or will have – an account balance that fluctuates significantly on a regular basis, this is one fee to keep in mind. Check to see, for example, whether a prospective banking partner requires a firm minimum daily balance. In some cases, too, a minimum first deposit (that could total $500 or more) might be needed in order to open an account or to take advantage of selected services. This is where a careful read of the bank’s terms and conditions for business checking is vital.
Transaction allowances
Transaction allowances (and their associated fees) might either be a non-factor for you – or, at worst, a recurring source of financial headaches. In this definition, “transaction” can be anything from cash or check deposits, to withdrawals, transfers and electronic payments.
Thankfully, you can find banks offering unlimited free transactions. If not, be sure you know how many no-charge transactions you would have before fees kick in. If the number of free transactions is, say, 300/month and that number is well beyond your expectations, it’s not anything that should concern you. On the other hand, if you would surpass that number by the 10th of the month, finding a more accommodating bank needs to be a priority.
Deposit allowances
Some banks track the number of cash deposits made each month into business checking accounts and charge a fee when a set number of transactions is exceeded. If your business is highly cash-oriented or you make daily deposits, this is one fee you can easily avoid with a little bank shopping.
Application versatility
Spurred by the rapid growth of fully-online banking, the prevalence of online applications for all banking has grown rapidly. Today, to be competitive, business checking account apps must be totally mobile, perform all common transactions, offer integration with financial software, have useful built-in tools and be available 24/7. If you’re considering a traditional bank, make sure they check all these feature boxes.
In-person vs. online services
Small business owners have more banking options than ever today. Do you want a bank that has physical branches you can visit, or do you conduct most of your transactions online? A business that deals that consistently makes cash deposits may be more comfortable with a traditional bank that has nearby locations. Those who are comfortable conducting their day-to-day business online – including banking – may choose to forego the physical bank approach and enjoy the freedom of choosing an institution based on factors beyond proximity.
Both online and traditional banks now offer applications that provide 24/7 access to accounts and the ability to perform most – if not all – of the typical functions customers would expect (as you might imagine, the most robust of these apps live in the online sphere). Regardless of the type of bank you select, this is increasingly important.
Finally, bear in mind that fully-online financial institutions usually offer higher interest rates than brick-and-mortar banks, due to the fact that they don’t have to support those physical branch locations. This difference can, in fact, be pretty significant.
In summation, now that we’ve established some parameters, here’s one more tip (OK…it’s more like a blatant plug!). First Internet Bank was chosen by Newsweek as its 2021 Best Small Business Checking account. Why? Let’s start with what we have to offer:
- Interest rates: Earn a competitive annual percentage yield when you maintain $10,000 average daily balance
- Service fees: No monthly service fee
- Minimum account balance fees: No, none of those, either
- Transaction allowances: Make as many as you need to
- Deposit allowances: Unlimited – because you shouldn’t have to pay to run your business
- Application versatility: Free secure 24/7 online and mobile apps; make ACH payments, wire transfers and more
- In-person vs. online services: We’re not just “another internet bank” – in 1999, we became the first fully FDIC-insured institution to operate entirely online, and we have been an industry leader in digital banking ever since. If you’re not totally attached to spending time driving and standing in line, we’re worth a look – and we think you’ll like what you see.
The right business checking account can get your organization moving in the right direction from day one. Why not start with the best? To learn more, check us out here, or call us: 1-888-873-3424.
