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With your entrepreneur’s infinite to-do list, dropping everything to perform a small business bank account comparison isn’t likely a top priority. But as much as you might want to ignore the process, choosing the best bank for your business is crucial, and it’s vital to conduct a small business bank account comparison that keeps the interests of your company at heart.
You’ll need to compare requirements, perks, and even sometimes hassles that come with every kind of small business bank account—many of which could end up creating more work (and headaches!) down the road if you pick the wrong account for your needs. Here’s what you need to know in order to make an informed, smart choice that will satisfy you and your business for years to come.
Before you begin your small business bank account comparison, determine what key components you’re looking for in your banking relationship. Namely, you’ll want to make sure that your bank of choice permits certain kinds of transactions if they’re important to you—wire transfers, cash deposits, direct deposit, and withdrawals. These are all factors that should influence the way you ultimately make your decision.
If you’re not familiar with these terms, here’s a quick overview:
Wire transfers are simply an electronic transfer of money from one bank account to another. For example, if a vendor accepts wire transfers for invoice payments, your bank would send the sum of the invoice from your account to your vendors’ account directly without requiring you to write a check (and for your vendor to deposit it).
Average Monthly Balance
The average sum of money in your checking account throughout each day of the month is known as your average monthly balance. Many banks require clients to maintain an average monthly balance of a specific amount of money in order to be eligible for certain accounts.
This one’s pretty self-explanatory. Cash deposits are the ability for an account holder to put paper money into their company’s account, rather than by using checks or wire transfers. Think back to when most business owners had to take their cash earnings from the register, into a zippered pouch, and walk them over to the local bank with a deposit slip in tow.
Automated Clearing House (ACH) transactions can take a few forms, including payroll, direct deposit, and vendor payments. Direct deposit has become the go-to method of paying employees, and vendor payments made through ACH tend to clear faster and require less paperwork than submitting payment by check.
If you have a personal bank account, you’re familiar with how withdrawals work. You put money into the bank, and you withdraw it when you need the money back. Sunrise, sunset. The same holds true for business bank accounts.
Most personal checking accounts offer the ability to pay bills online, making it easier to take care of recurring expenses. This popular feature is also available through several business banking accounts so entrepreneurs can keep on top of their bills in one place.
If you’ve ever checked your checking account balance from your phone, or deposited a check just by snapping a photo, you know how convenient mobile banking can be. Picture the perks of mobile banking on your personal checking account, but for your business.
When setting up a small business bank account comparison for your company, there are a handful of factors that outweigh all the rest. Most of them concern the balance you expect to maintain in the account on a daily and monthly basis, while others impact how often you can access your cash and accept payments.
Of all the big considerations that go into a small business bank account comparison, the most important is the amount of money you need to keep in the account in order to avoid penalties and fees. Most business bank accounts will require you to maintain a minimum daily balance in order to keep your account in good standing. Accounts with low balance requirements often come with fewer features (such as monthly fee waivers and free wire transfers), and those with more features tend to require higher monthly balances as a result.
Make sure you know that you can maintain the monthly balance requirement needed to keep your account in good standing, and that you choose an account that’ll give you the right number of features in exchange for a balance you’re confident you can maintain.
It’s crucial to know how many transfers you’ll need to make every month. Most free- or low-fee bank accounts will limit the number of transfers you can make during the course of a month—this is what helps keep fees low and average daily balance restrictions more manageable. That’s all well and good for companies that don’t often move around money, but if that’s not the right setup for your business, you’ll need to factor this in.
You can avoid unexpected headaches like these if you compare small business bank account transaction rules. Some accounts may limit the number of deposits or withdrawals you can make every month in exchange for no-fee, no-frills banking. If you don’t foresee your company making a ton of transactions, then a barebones business bank account is fine for your needs. But if you envision lots of monthly money moves, choose your account accordingly.
Nothing is more frightening for a small business owner than needing to access their company’s money but not having it. But if you pick a business checking account that only allows you a set number of withdrawals, that’s the exact scenario in which you might find yourself.
Capping the number of deposits and withdrawals you can make every month might help keep maintenance fees low, but that’s only beneficial so long as it doesn’t impact your ability to operate your business. If you need more free withdrawals or deposits than an account provides, consider finding another option that won’t penalize you with fees for going over your allotment every month.
Monthly minimums and transaction limits are important factors in choosing the right small business bank account, but so is the role of relationships. Few people want to go through the legwork and hassle of switching banks, and this is especially true for businesses (which have to migrate invoices, transfer info, and heaps of other banking information). Only about 7% of small businesses actually change banks, according to researchers at J.D. Power and Associates.
Developing a relationship with the right bank is the best way to future-proof your banking needs. If you can find a bank that has different checking, savings, and credit card options that will serve your business as it grows, you’ll reduce the risk of having to switch banks in the event that you outgrow your current account.
Plus, if you build a strong enough relationship with your bank, you could potentially set yourself up for better potential success for a small business loan from your bank if and when the time comes—and a bank loan is a type of financing that’s notoriously difficult to obtain.
Technology is a make-or-break factor for any small business bank comparison effort. If you need to have a robust mobile banking app, or can even get by with a totally online business checking account that doesn’t accept cash deposits, you’ll have a much different criteria to start with than you would if you were satisfied with doing all of your banking at a local branch.
There’s been plenty of innovation within the banking industry during the last few years. Most accounts now offer mobile banking, automatic bill pay, in-app customer service, and easy transfers without the need for paperwork. If you need this kind of flexibility in order for a bank to fit your needs, you should start off with technology as your deciding factor.
If you’re setting up a business savings account, that means that you’ve already established a checking account for your business and have enough money to cover its average monthly balance requirements (if there are any). That’s a huge accomplishment in its own right.
Now that you’re looking to put away some extra money, you’ll want to make sure you’re earning the most interest you can. The best way to do this is to compare interest rates across several business savings accounts. High-yield business savings accounts are the best place to start your search, as they offer the best annual percentage yield (APR) on your balance. But bear in mind that these accounts are usually with smaller, regional, or online-only banks. You’ll need to determine if you’re willing to sacrifice some creature comforts in favor of earning more money through interest.
This point applies to checking and savings accounts alike, although you won’t likely withdraw funds from your savings account all too often (and if you do, you shouldn’t be looking at savings accounts quite yet!).
Most high-yield savings accounts limit the number of withdrawals accountholders can make every month, which cuts down on costs to the bank. This is one of the few ways in which these banks can offer such great APRs to customers. Other banks may limit the days of the month in which their clients can make withdrawals as another way of reducing expenses.
If you envision needing to have quick access to your savings cash, or may need to make frequent withdrawals, be sure to bear this in mind as you weigh your options.
If you need to rule out high-yield business savings accounts, interest rates begin to look pretty similar across standard savings account products. Most savings accounts follow Federal Reserve interest rate guidelines, meaning that there isn’t a ton of derivation among the APRs being offered across each bank.
But that doesn’t necessarily mean that banks can’t (and don’t) find other ways to attract new customers. Some banks will offer introductory interest rates that surpass the standard APR. These promotional interest rates will run for the first few months (or the first year) that the new account is open. This provides a great opportunity for account holders to kickstart their savings, even if the high interest rate doesn’t last forever.
Another exciting offer to watch for is the signup bonus. Banks will sometimes offer new account owners with a cash bonus just for signing up and funding the account with a minimum amount of cash. These offers can vary from $50 to $200 depending on the deposit minimum required by the bank’s terms and conditions.
With an understanding of the key definitions and differences in hand, let’s looking at a real business bank account comparison example. Here are the best Chase business checking accounts for small business—there’s likely a great pick for your company within these options:
Chase Total Business Checking is a great example of an entry-level business banking account. The account provides for 110 free transactions per month, and allows you to make $5,000 worth of cash deposits monthly without any additional charges.
Chase Total Business Checking has a required monthly balance of $1,500 to allow you to avoid the monthly $15 fee. And even if you dip below $1,500, the account’s low fee will help make sure that you’re not hit too hard when you’re having a leaner month.
The minimum first deposit is a manageable $25, plus Chase is offering a limited-time $200 bonus offer with a few qualifying actions.
Chase Performance Business Checking is a great option for small business owners who might need a few more monthly services from their bank in exchange for keeping a higher monthly balance in the account. This option is perfect for mid-sized businesses that need up to 250 free transactions, the ability to deposit $20,000 in cash per month, and conduct the occasional domestic wire transfer.
You’ll need to maintain a monthly balance of $35,000 to avoid the $30 monthly fee, but the minimum first deposit is small in comparison. You’ll also be eligible to claim the $200 limited-time bonus offer with qualifying actions.
Chase Platinum Checking sits at the top of the spectrum in terms of features, perks, and minimum monthly balance requirements. In exchange for keeping $100,000 in your account every month, you’ll not only waive the $95 monthly fee, but you’ll also receive 500 fee-free transactions and $25,000 worth of free cash deposits every month.
This account will also provide you with four outgoing wire transfers monthly for free. Chase Platinum Checking is build for high-powered businesses that have plenty of cash in hand to help run their business. And, in turn, the account provides plenty of opportunities for small business owners to make the most of their banking relationship. And, of course, you’ll be eligible to claim the $200 limited-time bonus offer with qualifying actions, too.
No matter which bank account you choose, understanding exactly what your business will need in a bank account will set you up to find the right bank for your business. Of course, you can always change your pick—so don’t worry about that. But comparison shopping is a great idea, just like being the most informed business owner possible.