By Chris Keller 
Setting up a business bank account is a necessary step for any business owner. It’s important to keep your personal and business finances separate from each other for liability and tax purposes, and maintaining separate accounts is one of the simplest ways to do that.
But how do you know what bank is right for you and your small business? You should consider much more than which bank is close by or which one you’re currently using to manage personal accounts. Though there are many reasons to a select a business bank, one of the most important is understanding the bank’s overdraft fee policy.
First, let’s clarify four of the most common types of overdraft fees:
Before 2010, many financial institutions automatically enrolled customers in overdraft protection programs unless you willingly opted-out. Now regulations require you to opt-in instead, so you’re not automatically signed up. There are a few reasons why people advocated against automatic overdraft protection:
Being a small business owner, you’re already short on time, so let us help you get started with your banking decision. We’ve researched the top 20 banks for small businesses and put this list together to help you understand their overdraft fee structures better. Check them out below, ranked from lowest overdraft fee to highest.
For whatever bank you choose to use, it’s responsible to understand their overdraft fee structure. However, it’s best to try to avoid overdraft fees in general. Below are a few solutions to help your business stay on track.
Always understand your business’ account balance. Almost every bank has a mobile app, and its most basic function is to keep you informed of your balance. Most apps also let you set account alerts to notify you if your balance is under a preselected amount.
Knowing when invoices are coming in and expenses are coming out is critically important for predicting your account balance and keeping it in the positive. Tracking your transactions via software or chart will help you understand if you need to take action and reschedule something before it’s too late.
Link your business checking account to a savings account or line of credit. If you have overdraft protection and overdraw your checking account, the bank you’re with will take money from your linked savings account or another associated account to cover the difference. There may be a fee associated with this, but it’s usually much lower than an NSF fee.
Lastly, use overdraft protection with caution. By implementing the tactics above, signing up for overdraft protection can help you save money (for example, a $12.50 over a $35 fee). However, that does not mean that these fees can’t pile up if misused. Be sure to read all fine print to ensure you fully understand your bank’s fee structure and policies.
Overdraft fees are some of the steepest fees that banks charge, so understanding your bank’s policies and fee structures up front will help your small business save money and stay on top of your financials.
Do you belong to one of the banks above? Let us know on Twitter @Revenued_com.
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