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6 Types of Bank Accounts For Small Businesses

Selecting a new business bank account and setting it up can seem like a daunting task. There are numerous options to explore – all of which have been developed to help you, a small business owner, effectively manage your money. Each type of account has a different purpose. In this guide, we delve into the different types of bank accounts available for businesses, drawing attention to their unique advantages and disadvantages, so you can feel confident that you’re making the right decision.

1. Business checking accounts

A business checking account is the most versatile and widely used form of deposit account. Just like a personal bank account, you can put in money, withdraw cash, make payments and transfer funds. A debit card and checkbook are usually issued and transactions can be easily managed through online banking or a mobile banking app.

  • Pros of business checking accounts: Low opening deposits, offer unlimited access to funds, eligible for FDIC insurance coverage.

  • Cons of business checking accounts: Funds are continuously moving in and out so they aren’t suited to earning interest, and although interest-bearing checking accounts do exist, they are relatively rare.

2. Business savings accounts

If you want a place to store extra funds and let them grow in value, a business savings account could be the right choice for you. This type of account enables you to earn a competitive interest rate on your savings. However, it’s important to note that federal law restricts you to six fee-free withdrawals per month and most accounts don’t allow you to write checks or withdraw cash using an ATM.

  • Pros of business savings accounts: Provide the opportunity to accrue interest on your money.

  • Cons of business savings accounts: There are higher opening deposits and restricted access to funds.

3. Business certificates of deposits (CD) accounts

An alternative to a savings account, a CD account can earn your business even more in interest. The only thing is, you can’t touch your money for a set amount of time. This is commonly referred to as the CD term and can range from a few months to several years. If you take money out of your CD before the term is up, you’ll be required to pay a steep penalty charge. 

  • Pros of business certificates of deposits accounts: You can earn high interest on your extra funds.

  • Cons of business certificates of deposits accounts: They are restrictive, could bring on costly fees and usually require a minimum deposit.

4. Merchant accounts

If your company accepts debit and credit card transactions, a merchant account will be necessary. When a customer pays you, the money goes straight into this account and is automatically transferred to your other business bank accounts once it has been processed.

  • Pros of merchant accounts: Facilitate essential credit and debit card transactions from customers.

  • Cons of merchant accounts: There are usually application, set-up, per-transaction, and early termination fees involved.

5. Business money market accounts (MMAs)

An MMA is an interest-bearing account that blends some of the features of business checking and savings accounts. Most pay a higher interest rate and often include check-writing capabilities and debit cards for ATM withdrawals.

  • Pros of business money market accounts: Offer insurance, higher interest rates, and more ways to access your money.

  • Cons of business money market accounts: Require minimum deposits and come with fees and limited transactions.

6. Foreign currency accounts

A foreign currency account, sometimes also known as a multi-currency or borderless account, is ideal for importers and exporters who pay or receive funds in another currency. It lets you send and receive funds in multiple foreign currencies and can be maintained by an onshore or offshore bank. Depending on the account, your money may even earn interest.

  • Pros of foreign currency accounts: Holds multiple currencies and can earn interest.

  • Cons of foreign currency accounts: High minimum deposits are needed, fees are involved and the total balance of your money fluctuates as currency value changes.

Setting up a business bank account

So, now you know about the best small business bank accounts available, the real journey begins. All of the well-known banking providers will offer business bank accounts, in some form or another, so it’s crucial to do your own research to ensure you’re getting the best deal that’s out there. Whatever option you chose, just remember – it needs to suit your company’s unique needs.

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