When running a small and medium-sized enterprise, it is essential that you separate your personal and corporate finances by opening a bank account for your company. This is to enable you to distinguish your enterprise’s equity from your personal assets for clean financial records. However, choosing the right bank account can be quite challenging. This is because of the wide range of account options available in the market, as well as the amount of money involved. The process becomes even more intimidating when you decide to choose a business bank online. So how do you identify the right bank account for your enterprise?
This article discusses tips on how to choose the ideal bank account for your enterprise.
Types of Bank Accounts for Businesses
There are five primary types of bank accounts for businesses.
1. Savings Accounts
This is the first type of bank account that most people open with any bank. Although they earn more interest than checking accounts (at least those that offer interest), savings accounts come with relatively high fees. One unique attribute of a savings account is that access to your money is limited. You can only withdraw cash to a specified number of times in a month.
2. Checking Accounts
A checking account is the most basic choice of a deposit account for businesses. These accounts allow enterprises to deposit, withdraw, transfer money, and make payments without limit. You can transact with a current account as many times as you want, which makes it a better choice for enterprises. However, some banks may require you to maintain a minimum amount as your account balance. Checking accounts are also cheaper than most account types, and you can acquire a debit card for ATM withdrawals.
3. Interest-bearing Accounts
An interest-bearing account works in the same way as a checking account. This means that you have access to unlimited transactions and withdrawals on your funds. All interest-bearing accounts generate interest, which differentiates them from typical checking accounts. The interest earned through interest-bearing accounts is generated as per the annual percentage yield (APY), which varies with different banks. Note that the APY for this type of account is usually less than 1%.
4. Certificates of Deposit (CDs)
CDs provide businesses with very high returns. This is because CDs come with a higher APY than most of the other accounts. Depending on the bank you choose, it is possible to find a certificate of deposit account with an APY of over 1% or even above 2%. However, you should be aware that withdrawing money from a CD account is entirely limited. You can only withdraw funds when the CD reaches maturity. If you are looking for an account that yields substantial returns, then a certificate of deposit is the ideal choice for your enterprise.
5. Money Market Accounts
These accounts combine the features of checking and savings accounts. However, they have higher interests than checking accounts.
How to Choose the Best Bank Account
Here are some tips on how to identify the ideal account for your enterprise.
• Make Your Choice Based on Your Needs
Different small and medium-sized enterprises have varying financial and operational needs. For example, if your enterprise is involved in daily or regular transactions, then you might an account offering unlimited withdrawals and transactions. For a firm largely involved in travelling and operations in a foreign country, then an account with digital options is the ideal choice.
• Can You Bank Online?
It is impossible to always walk into a bank every time you want to make payments, withdrawals, or deposit cash. The best account for your enterprise is the one that allows you to manage your funds online. You might want to open an account with a neobank, where all banking services take place online entirely.
• What are the Transaction Maintenance Fees?
Before you settle on a bank account for your enterprise, consider evaluating the transaction and maintenance fees attached to it. While some banks charge no fees for basic banking services, most bank accounts might incur monthly fees for account maintenance.
• Look for the Services Offered
Firstly, you must be sure that the bank you choose offers effective customer support and for 24/7 if possible. This way, you can rest assured of help in case of possible problems with your account at any time. Also, scrutinise the various services attached to each account, including both online and in-branch services. If you choose bank online, look for an account that facilitates immediate access and centralised management of your funds.
• Minimum Account Balance Requirements
This might not be such a crucial factor, but it is quite fundamental for your enterprise. Most banks will require you to have a minimum balance in your account for it to remain active or valid. This can be quite limiting, especially when you are running a start-up or small enterprise. Enquire with your bank to see whether the minimum account balance can be skipped for a given account type, such as a checking account.
• Interest Rates Offered
If you are looking for an account that will be generating high returns on your funds, then the interest rate is a fundamental factor to consider. Some accounts have higher interest rates than the others, which also varies with different banks.
Can You Have More Than One Accounts for Your Enterprise?
Yes! It is possible to have multiple bank accounts, which suit your corporate needs. For example, you can have a savings account and a checking account, all under your enterprise’s name. Other businesses may opt to have two checking accounts to put a line between daily transactions and bill payments.