Having a business bank account (or accounts) is a lot costlier than maintaining a private account. Charges can accumulate easily as businesses often incur many additional fees unwittingly.
The amounts you pay the bank in fees can depend on many different things, ranging from the bank policies to overdrafts and the number of transactions you make.
You probably won’t be able to get rid of all the extra charges, but you can keep them to a minimum. Here are some tips to help you achieve that.
Shop around before you settle for a bank
Your bank will be your partner who handles the most sensitive part of your business — your finances. That’s why it’s essential to find a bank you’ll be on the same page with. In order to do that, first, you need to think about your current and future needs.
Every bank has its own fee structure, and you need to choose one based on your needs. For example, if you’re a type of business that gets paid in smaller increments and often, you’ll want to avoid banks with high transaction fees.
Since you will be building a long-term relationship with your bank, you may even be able to negotiate the fee structure and have some charges reduced or deducted.
Use online banking
Internet banking is on the rise and for many good reasons — it’s convenient, you can easily keep track of your transactions, and it allows for better record keeping. However, another advantage of this type of banking is lower fees.
Direct banks, which operate solely remotely, are the least likely to impose service or minimum balance fees. Since they don’t have brick-and-mortar infrastructure to care about, they can afford to be affordable.
However, you need to be careful when choosing an online bank. For example, you can find out if the bank is FDIC-supported by visiting the FDIC website and selecting the option “Is My Bank Insured?” If you don’t find it on the list, contact FDIC for more info.
Link multiple bank accounts
If you have more than one account in a bank, consolidation may be the right option for you. For example, if you have a checking and saving account, you may link them and thus, save a lot of money in fees.
You will likely get a monthly fee waiver by linking them together, and you may also get better interest rates. Furthermore, you reduce the risk of dipping below the minimum balance and incurring yet another unnecessary charge.
Additionally, by linking several accounts, you will also be able to avoid any overdraft fees, which go over $30 on average. Consolidation allows you to automatically transfer money between your linked accounts if you’re at risk of an overdraft, thus avoiding the hefty charge.
Use bundled services
If you know exactly what you need from your business account, you may even want to go for bundled services. Essentially, you make a plan with your bank to pay a fixed monthly fee for a range of services you decide on.
You may add debit and credit cards and use payroll services as part of the bundle. Your account may include some free transactions as well. This is great if you have a relatively stable number of deposits and withdrawals per month.
However, beware that if you go over the predetermined number of transactions included in the bundle, you’ll be required to pay extra fees on top of your monthly charge. So before you decide on bundled services, make sure you make a correct estimate of your needs.
Identify avoidable fees
There are numerous fees you can avoid simply by being aware of them and doing your best not to incur them unnecessarily. Here are the most common ones.
Minimum balance fee
Most major banks will waive the monthly maintenance fee if you maintain the expected minimum balance. The fee is not high, ranging from $10 (such as in Wells Fargo) to $15 (Chase) and $16 (Bank of America). However, the costs add up quickly from month to month.
It’s important to keep track of the number of monthly transactions you make because they can influence your banking fees. We’ve already mentioned that you can pay a set monthly fee for a predetermined number of transactions. Otherwise, each transaction will be charged individually.
If you link your accounts, you’ll be a lot less likely to overdraw and thus incur additional fees. If this is not an option for you, some banks allow you to set alerts to notify you via email or SMS when your balance is low.
Make sure you pay everything on time. For example, late credit card payments can incur fees up to $40 and cause higher interest rates, so be careful.
More cards, more fees
It may be useful to have more cards, but many banks will charge you additional fees for each of them, so make sure you really need them, and if not, get rid of the unnecessary ones.
Most banks allow for free ATM use, but many also impose a limit after which they start to charge a fee. Also, don’t use other banks’ machines. Ask your bank about the ATM use and whether they are a part of a national or even international network of banks that allow free ATM use within the network.
Check for special offers
Another option, especially if you’re starting a new business, is to shop around for special business offers. Many banks will have promotions aimed at new businesses with no fees for up to a year. You can take advantage of these kinds of offers, but beware that they usually come with a limited number of transactions.
What’s more, if you’re planning to build a lasting relationship with your bank, think about what they offer after the promotion expires. Also, think about whether you’ll be satisfied with their charges when you scale up your business.
Banking fees are usually not that high, but they add up quickly if you don’t take notice of them and do everything you can to reduce and avoid them.
Michael has been working in marketing for almost a decade and has worked with a huge range of clients, which has made him knowledgeable on many different subjects. He has recently rediscovered a passion for writing and hopes to make it a daily habit. You can read more of Michael’s work at Qeedle.