Choosing a Checking Account for Your Business
Choosing a Checking Account for Your Business. You should select a business checking account, or a series of accounts, that match your needs. Just like when choosing a personal checking account. Start by considering how you use your business checking account:
- How many checks do you write each month?
- What types and how many deposits do you typically make?
- How large of an average balance do you maintain?
- Is there a convenient branch or ATM close by, especially if you make daily deposits?
Lower Balance Accounts
Most institutions offer a basic business checking account with very low or no fees. They will also restrict the number of checks that can be written on a low or no-fee account. This is to prevent a business from having an account with low balances and writing a large number of checks. For instance, most institutions would not allow an account with a low balance to be used to process payroll checks. Especially if it is for a business with hundreds of employees.
A few years ago with the enactment of the Dodd-Frank Act, institutions were allowed to start paying interest on corporate checking accounts for the first time since 1933. Some institutions have taken advantage of this change and now have business checking accounts that pay interest depending on the level of balances and activity.
Larger Balance Accounts
For businesses with larger cash balances, most institutions have programs that combine a business checking account. They combine them with a type of interest-bearing savings account. They may even have an automatic sweep provision. Automatic sweep provisions move balances in excess of a pre-determined level out of a non-interest-bearing checking account. It then moves those funds into an account where interest is earned. There may be a limit on the number of monthly transfers back into the checking account. All you do is periodically (perhaps once or twice a month) move the funds you will need back into the checking account. If you can do this online, so much the better.
If you are looking for an account where you will write a large number of checks or a payroll account for a large number of employees, be sure to discuss your needs with the institution, and they will probably have an arrangement with fees and balance minimums that will work for your business.
Depending on your needs, ATM access to the account and online capabilities may be a must.
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