Small business owners and founders of startups have a lot to consider when it comes to their business needs. On that long list? When and where to open a small business checking account or a small business savings account.
You have many options. From traditional banks and credit unions to online, fee-free “neobanks,” there are many possibilities, and each comes with its own set of pros and cons.
Importance of Having a Business Bank Account in 2023
If you have a business—including a side hustle you hope to grow— open a business bank account. No, there’s no law requiring it, but the benefits outweigh the drawbacks. It’s key to separating your business finances and personal finances and that means:
- You can keep track of your business financial health at a glance.
- Tax season will be a lot easier since your income and expenses are all in one place. (And many business bank accounts integrate with accounting software.)
- If you formed a business entity (LLC or corporation) you can help maintain asset protection benefits.
- Many small business lenders and financing providers require a business bank account to verify revenues when you apply for a small business loan.
Need more incentive? Nav’s Small Business Banking Survey found that 26% of businesses that lacked a business checking account had considered closing their business in the two years(before the survey, but only 14% of businesses with a bank account considered doing so.
In the past, opening a business bank account used to be a hassle (or expensive), it’s a lot easier now to find and open a no-fee bank account or one that pays interest.
Best Banks to Open a Business Bank Account
Here are some excellent choices when you’re considering a business bank account.
We’ll look at both online banking and banks with physical locations, as well as those that charge a monthly maintenance fee and those that have no fees. By the end, you should have a better sense of what you need in a business account.
How to Choose the Best Small Business Bank Account
Since not all banks and banking services are created equal, it’s important to start your search for the ideal bank with a list of what matters to you.
First, know that you’re not limited to opening a bank account for your business at your personal bank. It may be convenient to do so, but if that bank doesn’t offer the features you need, it may be better to look elsewhere.
If you need a bricks-and-mortar bank with local branch locations you can visit in-person, then location will be key.
But many small business owners prefer to take care of their banking online. Mobile apps, mobile check deposits and extensive ATM networks make digital banking options more appealing than ever. Many online banks also offer fee-free in-network ATM transactions, and some even reimburse out of network ATM fees.
Then there’s the decision of whether to pay fees or not, because there certainly are free business checking account options to consider. These may offer free cash deposits and withdrawals, however, they may have transaction fees if you make over a certain number of monthly transactions.
Consider the opening deposit requirement and any minimum balance requirements. Some banks charge a fee if you don’t maintain a certain average minimum balance each month, for example. If you’re just starting out or your cash flow fluctuates, you may want to consider a bank account with low or no minimum account balance requirements.
Most business checking accounts don’t offer much in the way of interest, but there are a few that do, and APYs are increasing as interest rates in general increase.
Other banking services may be important to you. These may include invoicing, a business savings account or money market account, business debit card or business credit card, or even loan products. Do you need services like ACH wire transfers or merchant services? You might prefer a bank that can be a one-stop-shop.
And finally, FDIC insurance is important to many business owners, especially in the wake of some high-profile bank failures. Look for a bank that is a Member FDIC, or a credit union covered by the National Credit Union Share Insurance Fund. (Make sure you are familiar with insurance limits. The FDIC’s free insurance estimator, “EDIE,” is helpful.)
Terms and Rates to Look Out for When Choosing a Bank for Your Business Account
One thing to realize is that even when a bank offers great perks or low fees, there could be hidden costs or limitations. So take the time to read the account disclosures that every bank provides. They may alert you to costs or features you weren’t aware of.
Even banks that offer free transactions may have transaction limits, and charge a fee if you go over a certain number of transactions or withdrawals in a month. Overdraft fees in particular can be expensive, so make sure you know what happens if you spend more than is available in your account. (Some banks will offer a line of credit tied to your checking account, and that can be a helpful back up.)
Interest-bearing checking or savings accounts may require a minimum balance, while basic business checking accounts are more likely to have lower deposit requirements.
Tips for Finding the Right Bank for Your Business Account
Once you’ve created your “must-haves” list for your business bank account, including whether you prefer mobile banking or a physical branch, whether you are okay paying a monthly service fee to get additional features like unlimited transactions, and any other qualifying features you’re looking for, compare one bank to another on your shortlist.
Does this bank have convenient ATMs, or will it reimburse you for using other ATMs?
Is there a minimum opening deposit, and can you meet it?
What fees does the bank charge, and are there ways to waive the monthly service fee?
Next, research how to open a business bank account with the bank you’re considering. Some have very simple online processes, while a few may require you to visit a physical branch to apply.
Also read reviews online about the bank’s customer support, since you want assurance that any issues you have will be quickly resolved and that customer service reps are responsive.
Whether you have a new business and are opening an account for the first time or you run an established company and are looking for a change, spend time with this decision. It’s an important one.
Traditional vs Online Business Bank Accounts
It wasn’t that long ago that your only choice for a business bank account was a traditional financial institution or credit union. In recent years, fintech companies have been springing up to cater to certain types of small businesses. With banks behind the scenes, they aim to make it easier for entrepreneurs to open a bank account and take care of business without setting foot in a branch.
Online-only business bank accounts tend to be easy to open, require low (or no minimum) balances and offer services catering to small business owners.
Frequently Asked Questions About the Best Banks for Small Business Accounts
Can I Open a Bank Account for My Business?
If you are one of the owners of a business, you can open a bank account for your business. That said some banks may cater to certain types of businesses, and may even require a formal business entity (LLC or corporation, for example). But as the list of options below shows, there’s something for virtually everyone.
Does It Cost Money To Open a Bank Account for a Business?
It should not cost you money to open a bank account, whether it’s a business or personal account. However, there may be a minimum deposit requirement to open the account and it’s not unusual for accounts to have monthly service fees.
Do I Need Good Credit to Open a Business Bank Account?
While it’s certainly possible for a bank to check personal credit and/or business credit scores before opening a business bank account, most do not. Some financial institutions will use Chexsystems to check if you have a history of bank account problems like overdrafts. And all will require you to provide personal details and a personal ID when you open an account but that’s because they are required to under federal banking regulations.
Can I Have Multiple Business Bank Accounts?
Yes. And that may make sense for some businesses, especially those where deposits exceed FDIC insurance limits. It can also make sense if your business has different needs.
For example, say you sell at craft fairs or farmer’s markets where you make a lot of cash sales. You may want a local branch for those deposits. But then let’s say you also operate an e-commerce store. You may want an online bank account that you can connect to your merchant account.
This article was originally written on October 25, 2021 and updated on April 19, 2023.