Guide to Finding the Exact Business Checking Account for Your Needs

Guide to Finding the Exact Business Checking Account for Your Needs

If you’re in the market for a business checking account, taking some time to research your options can literally pay off — especially if you’ve never opened a business checking account before.

Business checking accounts tend to come with more limits and fees than personal checking accounts, so getting the right account for your needs is important. It’s key to have a realistic understanding of how you will be using your checking account in order to maximize the utility of the account for your business while avoiding extra costs.

Getting the right business checking account goes beyond minimizing costs, however. A checking account with the right features — along with the right relationship with your bank — can become a valuable tool for your business.

Here are factors to consider when you’re seeking to open a business checking account:

Fees, Requirements and Restrictions

Maintenance Fees

Maintenance fees can range anywhere from around $10 to $50 per month. However, these can often be waived if you keep a minimum balance in the account, use the account a certain amount or link your checking accounts with other accounts (such as savings or money market accounts).

Transaction Limits

Many business checking accounts charge fees if you go above a certain number of transactions every month. Make sure you choose an account that can comfortably accommodate the number of transactions you’ll be making on a regular basis.

Average Daily Account Balance

Some business checking accounts will charge fees if you go below a certain average daily balance. Make sure you’ll be able to keep the minimum amount necessary in your account to avoid them.

Opening Deposit

Often, business checking accounts with lower basic fees may require a larger deposit in order to open an account.

Deposit Holds

Sometimes banks will hold on to deposits for a certain length of time before releasing them into your account. Be careful of this, because it can cause cash flow headaches.

Choosing a Bank

Beyond the individual features of the business checking account, it’s important to think about the total package a bank can offer you. Sometimes the bigger picture can be more important than one fee or feature.

Location

Your bank’s location can be a big factor in your decision — or not, depending on your business. If you’ll be making a lot of cash deposits, for example, choosing a bank with a convenient location can make a big difference in your day-to-day operations. Other businesses may never actually need to deal with a banker face to face, so location is not important.

Relationship With Your Bank

Is it important to you to have a relationship with your banker? The right relationship with a real person can help smooth the way for you in solving any problems you might have with the bank, as well as facilitate further cooperation such as loans. If this is important to you, choose a bank where someone will be available to you in person. Smaller banks or credit unions may be more accessible in this way than big national banks.

Suite of Services

Banks will often offer discounts or extra features if you use more than one of their services. It can also be more convenient for your business to have checking accounts, savings accounts, credit cards and other banking-related services under the same roof. When you’re looking at checking accounts, see if it will benefit you to bundle services.

Borrowing Needs

If you’re thinking about borrowing money for your business, establishing a checking account is an effective way of starting a relationship with a financial institution. If opening a checking account with a particular institution could make it easier to get a loan down the line, that’s something to consider as well.

Types of Business Checking Accounts

Business Checking Accounts With No Fees

“No fee” business checking accounts are widely available, but make sure you read the fine print. “No fee” accounts often have restrictions and limits (such as minimum balances or maximum transactions), and exceeding those limits can result in — you guessed it — fees.

Online Business Checking Accounts

If being able to visit a physical location of a bank isn’t important to you, an online-only bank may be an option. Look for features such as mobile deposit and waived ATM fees that can make virtual banking just as convenient as in-person banking. Keep in mind that in choosing an online bank, you may sacrifice the opportunity to develop a more personal relationship with a banker.

Business Checking Accounts That Pay Interest

Some banks will pay you interest on your business checking account balance, usually with the interest rate tiered according to the total balance. Make sure you factor in fees and other features of the bank account as well — if you’re paying high fees on the account, the amount of interest you earn may not be worth it, as interest rates on business checking accounts tend to be on the lower end of the scale. But if everything else about the account works for you, earning some extra interest on your balance can be a nice bonus.

Business Checking Accounts for Bad Credit

If you have bad credit, some banks may still offer you a business checking account, but it may come with restrictions. These can include:

  • Higher fees
  • Deposit holds
  • Denial of services like overdraft protection, an overdraft line of credit or business credit cards

However, even if your account has some restrictions, you can use it to improve your credit by keeping it in good standing.

Business Checking Accounts That Don’t Use ChexSystems

ChexSystems provides information to banks and credit unions about bank accounts that have been closed for reasons such as unpaid overdraft or nonsufficient-funds fees, identity theft or account fraud. Banks use ChexSystems to screen account applications, and they may deny applicants who have been flagged by ChexSystems. Information about closed accounts remains on an individual’s ChexSystems file for five years.

However, some banks do not use ChexSystems to screen applicants. Others may use ChexSystems, but still offer accounts to applicants with a ChexSystems record. In some cases, banks may allow applicants with ChexSystems records to transition to a regular account if the account remains in good standing for a certain period of time. Inquire with your chosen bank to see what options are available to you if you think ChexSystems will be an issue.

Business Checking Account for Your LLC

If you have poor credit or a ChexSystems record, forming an LLC and opening an account under your LLC’s name (rather than your own) can offer a solution for getting a business checking account. In general, setting up an LLC establishes your business as a separate legal entity from you. When you establish an LLC, you should get an Employer Identification Number (EIN) that is like a social security number for your business. You will use this and your LLC documents to set up a business checking account. There are a wide variety of accounts available for LLCs.

Checking In

Choosing the right business checking account is important — it can either help your business run smoothly or cause unnecessary hassles. So make sure you do your homework before signing on the dotted line!

Jennifer Sokolowsky writes about finance, legal and tax topics for publications and companies including The Puget Sound Business Journal, Avalara, and Avvo.
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