Choosing the best small business bank account for your needs starts with knowing the jargon. From there, review your transactions, budget for fees, consider whether interest matters and list out your required third-party integrations. From there, compare and contrast all your contenders, but beware of eligibility restrictions.
1. Familiarize yourself with business banking terminology.
Understanding the most important business banking terminology makes any comparison of two or more contenders far more meaningful. We’ve listed and defined the most salient terms below for your convenience, including common business checking fees.
- ACH transfer fee: An ACH transfer fee may apply to standard digital bank transfers through a clearinghouse. A common example is employee paychecks distributed via direct deposit. Most small business banks charge only for same-day ACH transfers, not standard ACH transfers, and the fee is typically minimal.
- APY: Short for “annual percentage yield,” the APY is a figure that represents how much interest your money earns over the course of a year. An interest-bearing checking account is a good substitute for a business savings account, and even minor earnings can offset account fees or bolster cash flow.
- Debit card: A debit card, which is a standard banking inclusion, is a payment method that pulls directly from your checking account funds. The main difference between a debit card and a credit card is that you pay the latter down the line with funds from your checking account.
- Monthly fee, a.k.a. “monthly maintenance fee”: A monthly fee is the amount you’ll pay per month to keep your account open. Many fintechs don’t charge these fees whatsoever, and if they do, the fee is often easy to get waived. For higher-end banking services, though, this fee may reach $100.
- Monthly fee waiver: A monthly fee waiver is a condition that, upon being met, results in the bank waiving your monthly fee. The condition is typically a minimum balance — with an Axos Bank Business Interest Checking account, your $10 monthly fee is waived if you maintain an average daily balance of $5,000.
- Online-only bank: An online-only bank, or “fintech,” is a fully digital institution with no in-person branches. Fintechs are known to offer low or no monthly fees, built-in accounting tools, comprehensive third-party software integrations, and competitive APYs. That said, you may find the lack of in-person support to be a challenge.
- Overdraft or non-sufficient funds fee: An overdraft or non-sufficient funds fee may be charged when you attempt a transaction that would take your account below $0 or withdraw more cash than is in your account. These fees are becoming increasingly rare in small business banking, though notably, Capital One charges them.
- Stop-pay request fees: You pay a stop-request fee when seeking to cancel a transaction with some banks. You likely won’t issue many stop-pay requests, but such requests are useful if you suspect fraudulent transactions. Paying fees to cancel such transactions only adds insult to injury.
- Third-party integrations: A third-party integration is a direct connection between your online bank account and any business software platform. Integrations ensure seamless data sync, minimize manual entry, and streamline cash flow visibility. The result is invaluable time saved and human error avoided.
- Transaction and processing fees: These fees may apply to other types of transactions that vary by bank. They are specific to each vendor, so we recommend contacting any vendors you’re considering and asking them for specifics. In many cases, your vendor will tell you that no such fees apply.
- Transaction limit: A transaction limit is the number of times you can perform a certain account activity before incurring fees or being unable to take the action again. For example, after $5,000 in cash deposits with a Capital One Basic Checking account, you’ll pay $1 for every additional $1,000 you deposit.
- Wire fee: A wire fee applies when you receive or send money via wire transfers. Most banks charge this fee for at least some wires, and it usually varies across domestic incoming, international incoming, domestic outgoing, and international outgoing wires. It’s rarely more than $50 per transaction, and often much less.
2. Watch out for restrictions.
Though relatively rare, some fintechs may impose restrictions on which types of businesses can open accounts. The challenge is that vendors rarely advertise these restrictions, and you may only find out about them when you apply. It may be worth contacting any vendors you’re considering to inquire about your eligibility.
Occasionally, a fintech will not allow a nonprofit or sole proprietor to open an account. Verify your eligibility before applying.
3. Clarify how you transact: cash vs. digital.
Review all your recent transactions to determine what percentage was cash and what percentage was digital. If you transact more in cash than digitally, prioritize business banking options that give you access to a large, nationwide network of ATMs or reimburse your withdrawal fees. If you transact digitally more than in cash, accounts with low or no fees for ACH and wire transfers are your best bet.
4. Set a budget for banking fees.
Although some of the best small business banking accounts don’t charge any fees, those that do typically offer services that are worth the spend. The push and pull between low fees and robust additional features, then, comes down to your line in the sand: How much can you afford to spend on fees per month? Set a fee budget and evaluate potential business bank account contenders accordingly.
5. Decide whether earning interest matters.
Not all small business bank accounts garner interest, and that’s not inherently bad. If your business is well-established with consistent revenue and steady cash flow, interest earnings may be a mere nice-to-have. Newer businesses, on the other hand, may see strong financial outcomes with the passive income of interest-bearing accounts. The higher the APY, the better, though high monthly fees may not be worth it for high APYs. A low-fee, high-APY option is ideal.
A business bank account entirely lacking the ability to garner interest isn’t a dealbreaker. In fact, a high APY may only be worthwhile if your monthly fee is low.
6. Jot down your required integrations.
This step is often the most involved. List all the third-party integrations your bank account will ideally have, whether it’s with whichever of the best payroll platforms you use, your credit card processor, or your accounting software. The latter type of integration is especially important since it near-fully automates the often tedious work of reconciling your business bank account. Consider eliminating vendors that lack the integrations you need.
7. Compare contenders’ most important features.
Once you’ve come up with a list of banks for which you’re eligible to apply, compare and contrast their key distinguishing factors. Some traits you may want to consider include:
- Monthly fees and fee waivers.
- Transaction limits.
- APYs.
- Third-party integrations.
- Access to physical branches and ATM access.
- Any additional features and tools, such as a native accounting platform.
Consider making a table to most effectively compare all your contenders across these criteria. You’ll likely have an answer as to the best small business bank account for your company sooner than later.
Some of the vendors on your list may also offer business loans. If you don’t pursue these vendors for checking accounts, they may be a fit if you need loans in the future. In that case, though, consider the pros and cons of
business loans versus crowdfunding.
