Welcome Back to Finergy's weekly blog!
Today we are going to look at an important aspect of your business' financials, your business bank account. Where you bank and the type of account you use is important. Today we will look at 6 things you should consider before picking a financial institution for your business account.
1. Bank vs. Credit Union - Today there are more banks and credits unions popping up all over the place. Most people don't know the difference between a bank and a credit union.
Credit unions are member-owned organizations. Members are the shareholders (account holders) of the credit union. By opening an account at a credit union you area gaining ownership into the organization. Due to this dynamic, the credit union's goal is not to make a profit (most are not-for-profit organizations), but on membership satisfaction and providing the best service. For members, this often means lower fees and lower loan rates and higher rates on deposit accounts.
In contrast, a bank is a profit -seeking entity. They are in business looking to make money. Account holders who deposit money in a bank, do not gain ownership. Since a bank is out to make money, there are often more fees tied to a bank, higher loan rates, and lower deposit rates.
When looking for where you want your business to bank you should check out both banks and credit unions, and find the one that offers the best services with the most affordable options.
2. Minimum Balance Requirements - Both banks and credit unions may have minimum balance requirement on their business accounts. This means that you must keep a certain dollar amount in your account. If the minimum requirement is a $1,000, then you will always have a $1,000 sitting in your account that you can't touch each month. Each institution has their own requirements. Often there will be several account options. Before signing up for any account make sure you understand the minimum deposit requirement.
3. Monthly Service Charge - Many institutions will have a monthly service charge. Sometimes you will find that an institution will waive the monthly fee if you meet a minimum balance requirement. Credit unions will often come up the winner in this category by either have a very low fee or no fee at all.
4. Additional Fees - On top of monthly service fees each institution will have several other service that could create a fee for your business account. Some types of fees to be on the lookout for are: stop check fees, returned check fees, overdraw fees, bank checks, money orders, wire transfers (both incoming and outgoing), ACH and more. Each institution should have a published listing of their fees.
5. Online Services - Before signing up for an account try to find out as much as you can about the online options the bank offers. Try to find out if their system is user friendly, does it frequently go down, do other account holders like to use it? This information may take some investigation on your part, but I think it is important. In today's world, we rely on being able to easily access our account information on demand.
6. Branch Location and Hours - Even though you may not go to the bank in person very often, it is good to know that the institution you choose has a convenient location and hours that allow you to visit the bank when you need to. The perfect account at a bank that is an hour away and closes by five will not be very helpful when you must go to the bank in person.
Each institution you review will have some pros and cons. Create a spreadsheet and pick a few places to check out. Write down what is important for your institution to have. For some people, a minimum balance requirement may be a problem and a monthly service fee may not be an issue. For some businesses that have a high volume of transactions each month a limit here could be a big problem.
By taking time upfront, you will save yourself from unexpected fees, balance requirements or horrible hours. You can also plan any additional costs you may incur into your budget. Remember that a bank or credit union should be working for you. Do not let them push you into a product or service that doesn't seem right. You know your business' needs better than anyone.
See You Next Week!
**We hope you enjoyed our blog. Please note that the intent of this blog is to provide general information and should not be construed as financial, financial tax, accounting, legal, consulting or any other type of advice regarding any specific facts and circumstances, nor should they be construed as advertisements for financial services.