1/1/2019

Financial Guides

Comparing Business Bank Account Fees: Do You Know All the Fees Your Bank Charges?

Whether you're just opening a business bank account or are a veteran user, you need to understand how its fees work. Let's take a closer look at them here.

Tim Wu

Head of Marketing & Strategic Partnerships

According to the U.S. Small Business administration, small businesses contributed to 99.9% of all U.S. businesses in 2018. Since small business is such a huge part of the economy, it’s important for owners to have the resources they need.

One of the biggest factors in maintaining a small business is successful accounting. Organizing your finances is one thing, but making sure you’re saving as much money as possible is equally as important. To help small businesses keep as much of their revenue as possible, our guide will help you evaluate the most common business bank fees.

Read more to understand the types of fees you might be paying for and how you can avoid the most fees possible.

Why You Need a Business Account

Finding the best bank account is crucial to your business’ survival. Whether you own a sole proprietorship or LLC, your bank account can help protect you from liability and maintain growth practices.

Bank accounts for LLCs and other types of businesses are important for taxes, legality and more. If you’re an entrepreneur or sole proprietor, you might not feel like you’ve reached the need for a separate business account. Yet, without establishing your accounts early on, you’re limiting your potential to grow.

Funding is one of the most important aspects of building a small business, and you won’t be able to organize your finances if you don’t have a specific account. Furthermore, merging your personal and business finances means your subject to more liability. If something happens to your business, you don’t want to put your private, personal funds at risk.

As you look for a bank account, you should evaluate the following features:

  • Interest rates
  • Online options
  • Services
  • Integrations with account and payroll
  • Fees

Comparing bank account fees is an easy place to start your evaluation. For any business owner, saving money is always a priority.     

Business Bank Account Fees

Banks charge fees to keep up with operational costs. Even though many fees might feel unnecessary, they’re being used to power customer service, online banking, branch locations and more.

Though you might not be able to get rid of fees altogether, you might be able to limit most of the fees below:

Monthly Service Fee

Your banks’ monthly service fee is usually the easiest to avoid. Most online banks don’t include a monthly fee unless they offer a subscription model for account management. Otherwise, most major banks include lists of conditions that you can meet to waive the fee.

Most basic business checking accounts will have monthly fees ranging from $10-$20. If you have a set balance in your account, the bank will waive your fee. Usually, the bank will require around $1,500 as the minimum balance. You can also link different accounts to reach the total balance requirement.

Excess Transactions

Many major banks charge a small fee for every transaction past a set number. Unfortunately, this adds up for larger businesses. If you conduct more than 25-100 transactions per month, you could pay an extra $0.40 to $0.50 on each item.

The best way to avoid excess transactions is by developing your business budget ahead of time. If you have a baseline for the number of transactions you’ll need, you can search for bank accounts that accommodate your needs and avoid the fees.

Overdraft Fees

Overdraft fees in business banking are very similar to overdraft your personal account. Most major banks charge about $35 per each overdraft item.

If you’re looking into online banks, most will waive this fee and instead block the transaction altogether. The online banks that do implement an overdraft fee are still slightly cheaper than physical banks at $25-$27 per transaction.

ATM Fees

Whether you’re banking online or with a major bank, most accounts waive ATM fees when you transact at partner ATMs. For instance, if you have an account with Chase you won’t incur fees at any Chase-owned ATMs.

Major banks will charge a fee every time you use a non-partner ATM. The fee typically ranges between $2.50 to $5 or a set percentage. While online banks tend to waive ATM fees, there’s usually a limit to how many are waived.

Wire Transfer Fees

Wire transfers are essential for many businesses, making this an important category to pay attention to. Most banks have no charge for incoming transfers, yet charge for outgoing transfers. Online banks typically have $0 wire transfers across the board, but many don’t even offer incoming transfers.

Online Business Account Fees

Online banks have grown within the past several years, especially when it comes to servicing small business clients. With an online bank account, you can usually enjoy fewer fees. Since these companies don’t operate or manage physical locations, they don’t require as much income through servicing clients.

The downside with online business accounts is that they may not offer the same level of services as major providers. As your business grows, you may find that you need more in-person support. Nevertheless, online banking is still a great option to help keep extra fees low. Find out what some of the top online banks charge below:

Major Bank Business Account Fees

Trusting your business finances to larger banks is best if you handle large amounts of cash flow and need more in-person support. If you own a small business, using a larger bank might even be better since it’s easier to handle cash transactions. Yet, with larger banks, you do usually have to contend with more fees than online banks.

Chase

Chase offers Total Business Checking accounts for small businesses, which have fewer fees. It’s a great option if you’re just starting out, but it may not offer everything you need if you deal with more than 100 transactions per month. Some of the account fees include:

  • Opening Deposit: $0
  • Monthly Fees: $15 or $0 with a $1,500 minimum balance or linked account
  • Excess Transactions: $0.40 for each debit and non-electric deposit above 100
  • Overdraft Fees: $34 for each overdraft item
  • ATM Fees: $2.50 for non-Chase ATMs and foreign inquiries, $5 for foreign withdrawals
  • Wire Transfer Fees: $0

Axos

Axos isn’t a major bank, but it isn’t fully digital either. The bank has six locations throughout the Western U.S. to offer limited customer support, but it has a robust digital offering to support clients elsewhere. Axos business accounts include the following fees: 

  • Opening Deposit: $1,000
  • Monthly Fees: $0
  • Excess Transactions: $10 per item
  • Overdraft Fees: $0
  • ATM Fees: $0
  • Wire Transfer Fees: $0 incoming, $35 per domestic transfer and $45 for an international transfer

Bank of America

Bank of America is one of the biggest banks in the U.S. For new owners, it can be beneficial to partner with such a big institution. You’ll have easy access to branch locations no matter where you conduct business, and that means you have more customer support than other options. Bank of America Business Fundamentals Checking accounts include the following fees:

  • Opening Deposit: $0
  • Monthly Fees: $16 or $0 when spending $250 per month using a Bank of America card or maintaining a minimum $3,000 balance
  • Excess Transactions: $0.45 per item after the first 25 transactions
  • Overdraft Fees: $35 per item
  • ATM Fees: $5 or 3% of each transaction for non-Bank of America ATMs
  • Wire Transfer Fees: Fee varies

How to Avoid Bank Fees

Sometimes banking fees aren’t avoidable. The best way to limit fees is to work with an online bank that doesn’t require as much for its day-to-day operations. Even with an online bank, there are sure to be small fees here and there.

 With a physical bank, it’s even more difficult to avoid, though the perks of working with a large bank may be essential for your business. Use our tips below to help limit your amount of fees, regardless of the type of bank you choose.

Develop Your Business Budget First

Before you go searching for a business bank account, sit down and try to determine a baseline for your budget and finances. Ask yourself the following questions:

  • Do I operate mostly through cash or checks?
  • What is my average monthly cash flow?
  • Do I need to manage extra capital?
  • How many transfers will I need to make per month?

Answering these questions will help you evaluate the type of account you need. A smaller online account is best for businesses without as much capital, but it’s more difficult to handle cash transactions.

Especially if you’re using a larger bank, your cash flow can help determine the account you need. If you choose an account with strict balance limits, you may be subject to fees for insufficient funds as you transfer money throughout the month.

Link and Bundle

The more you can stick with one bank, the more you should try. Especially when it comes to major banks, linking accounts and bundling services helps eliminate fees. For instance, if you have multiple business accounts you can link them together to help eliminate your monthly service fee.

Compare Banks According to Your Needs

Though chasing after the lowest fees is tempting, you’ll save more in the long run by prioritizing your needs. Don’t limit yourself to where your business is now. Instead, consider how you’d like to see your business grow.

Though you can always open multiple bank accounts, it makes life easier to find the best option that scales with you as you grow. As you compare bank accounts,

How to Manage Your Business Bank Account

Managing a business bank account starts with choosing the best bank for your needs. From there, it’s important to stay organized as you continue growing your business. Maintaining a clear view of your funds can help you determine where to allocate more money for resources, staff, operations and more.

Through managing your account, you can also see when it’s time to source new funds for your business. As a sole proprietorship or startup, initial investments will help you pave the way toward sustainable growth.


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