If you’re joining the approximately 33.2 million small businesses operating in the U.S., having a business bank account is potentially essential. However, choosing the right kind of business bank account isn’t always easy. Each one operates differently, making some better for specific situations than others. If you’re not sure which is ideal for your company, here’s a look at the different types of business bank accounts.
One of the most widely used business bank account options is the business checking account. Generally, it works similarly to a personal checking account. Along with accepting deposits, these accounts are also FDIC-insured for up to $250,000, giving you some peace of mind.
Plus, the barrier to entry is often low, as opening deposits are often more manageable. You get unlimited access to the money as well and can use connected checks or debit cards to handle business expenses and payments.
In some cases, business checking accounts do offer interest, but the rates are usually low. You may also get access to features like the ability to get debit cards for employees, bookkeeping software integration, and more.
Business savings accounts also work similarly to personal ones, giving you a way to earn interest on money your company sets aside. However, there are some restrictions to consider. For example, ATM, debit card, or check access to the money isn’t always offered. Additionally, you’re usually limited to six withdrawals per month.
The opening deposit amount is also potentially higher than a business checking account. However, it’s a way to get higher interest rates, all while having an FDIC-insured account.
Foreign Currency Account
Foreign currency accounts – which are also known as borderless or multi-currency accounts – are business bank accounts that work best for companies that receive or pay funds in several currencies. Functionally, they’re similar to other deposit accounts, like checking and savings accounts. However, a foreign currency account prevents the need to have separate bank accounts in the countries that rely on that currency, which can greatly simplify your business finances.
Most foreign currency accounts can support the majority of major currencies, such as U.S. dollars, Euros, British pounds, and Japanese yen. However, precisely which ones are supported may vary by bank, so it’s wise to confirm which currencies are manageable with the account to ensure it meets your company’s needs.
In many cases, foreign currency accounts also allow you to avoid specific currency exchange fees. Plus, you can often choose when to convert money between two currencies, making it easier to capitalize on favorable exchange rates when they occur.
Merchant Services Account
Merchant accounts are business bank accounts that include the ability to accept credit and debit card payments from customers. Once the payment is processed, the money is deposited into one of your other business bank accounts, simplifying the collection of funds.
When it comes to drawbacks, the biggest is usually the transaction fees. Additionally, you might encounter application and setup fees, as well as penalties for early terminations. The fees do vary from one bank to the next, so make sure to review the details carefully to see if the associated expenses feel reasonable based on the service provided.