If you think business checking accounts are the same as personal checking accounts, you’re in for a rude awakening. Business checking accounts are more nuanced than individual checking accounts, and they tend to face more limitations and incur more fees than consumer accounts do.
Opening a bank account is essential for raising your business’s credit score. But whereas a personal checking account is usually free to use, a business bank account is often subject to a slew of fees. Indeed, these banking costs can potentially add up to hundreds of dollars a year — if you don’t know how to avoid them.
When choosing a business checking account, you must be mindful of monthly or discretionary fees. Banks expect business owners to be more financially sophisticated than ordinary consumers, so you need to do your due diligence.
“It’s common for business checking accounts to have fees for services like wire transfers, large numbers of cash deposits, transactions or monthly service fees,” said Michelle Wright, group sales executive at Capital One.
The business checking fees you’re on the hook for depend on the individual bank’s terms. As a starting point, though, look out for these common fees:
If you keep more than the FDIC-insured limit in your business checking account, make sure you’re aware of strategies to protect your bank funds.
The fees business owners face run the gamut, from monthly maintenance fees to insufficient funds charges. However, not all business checking account fees are etched in stone; you can use some strategies to avoid many of them.
“Many banks offer easy ways to avoid these fees,” Wright said.
If it’s a traditional bank, meeting the balance requirement typically removes the monthly service fee. Other banks waive the monthly fee if you use the bank’s business credit or debit card. The same goes for the transaction fee: If you stay within your limit, you won’t face extra charges. That strategy also applies to online banks that set limits on the number of transactions.
Your banking needs will determine the best type of account for you, which means you’ll need to know how money comes in and out of your business.
“As a small business owner, it’s important to have a sense of how much money you expect to move through your accounts on a regular basis,” Wright said. “That way, you’ll be able to choose an account that works best for you. If you’re not running a lot of transactions through your business checking account, it may make more sense to choose a basic account, which usually comes with a lower monthly service fee.”
Popular ways to avoid business checking account fees are to sign up with an online bank or to use a financial technology startup’s platform. In recent years, fintech startups have disrupted traditional banks. Aiming to serve the small business community, these fintech companies are slashing fees, lowering requirements and leveling the playing field for the nation’s entrepreneurs. They may not have the deep pockets, extensive relationships or wide array of services that traditional banks offer, but they are applying automation and machine learning to cut costs and improve customer service.
Many new online banks don’t charge monthly account fees.
These online banks may not appeal to all businesses — after all, they offer no local branches or human interaction — but they are racking up thousands of customers seeking cheaper alternatives.
“Businesses shouldn’t pay to open a business checking account,” said Kathryn Petralia, co-founder of Keep Financial. “New online-only products eliminate much of the overhead traditional banking accounts require and therefore pass those savings on to customers by eliminating maintenance fees, minimum balance fees and similar costs. Find a product that supports your growth, not hinders it.” [In the market for a business loan to boost your growth? Check out the small business loan lenders we recommend.]
With that in mind, here’s a list of some popular free business checking accounts and what they offer:
Both traditional and online banks have advantages and drawbacks, so it’s up to you to choose which is better for your business checking account. Either way, it’s important to do your research, especially on fees, before you settle on a business banking partner.
“Some people appreciate the in-person relationship with banks, which has become more difficult during the pandemic,” Petralia said. “Other business checking accounts are optimized for efficiency online, reducing costs and increasing yields. Every business is different, and preferences vary. But the banking options … are far different than they were even two or three years ago. I’d encourage all businesses to get to know their options.”