Small Business Checking Key Terms

Learn small business checking terms including commercial checking and business interest checking

Small business checking is an essential part of doing business. Many banks now offer a wide range of different checking options. Deciding between commercial checking or business interest checking can be difficult. Learning about FDIC deposit insurance and the possibility of a business checking earnings credit allowance are important parts of choosing the right checking account. Business owners should invest the time to learn key terms associated with small business checking accounts and services before selecting them.

Merchant services

All banks are different in terms of what merchant services they offer. These services often are linked to small business checking accounts. They provide the business a method of managing cash flow and minimizing their risk.

Commercial checking

Businesses that have a higher monthly account balance may wish to consider a commercial checking account rather than a business checking account. These accounts may offer unlimited transactions for a set fee. They may also offer an earnings credit allowance.

Business interest checking

This type of small business checking account provides all of the advantages of a traditional checking account, but also applies an interest payment on balances. This particular type of account is ideal for sole proprietors and nonprofits. The interest paid is often based on a minimum daily or monthly balance within the account. Some commercial checking accounts may also be available as interest baring accounts.

Business checking earnings credit allowance

A business checking earnings credit allowance is a way of offsetting the bank's service charges. They are only used on non-interest bearing accounts. Some banks will peg this rate to the United States Treasury Bill rate.

FDIC deposit insurance

The Federal Deposit Insurance Corporation, FDIC, protects small business checking account balances up to a specific amount. Small businesses will want to determine if their bank offers this type of protection prior to working with it.

Client trust accounts

Some small businesses need to establish a client trust account when they hold client funds in escrow. Some banks link these accounts to business checking accounts. They are often required for real estate agents and attorneys.

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