What Types Of Bank Account Does My Business Need?

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When starting a business, you’ll probably want to set up separate business bank accounts. Having a clear divide between your personal finances and business finances can make bookkeeping a lot easier, and can also be necessary if you decide to set up a limited company.

However, when choosing bank accounts for your business, you may want to consider more than one account. Different types of accounts can have different benefits. Below are 3 of the main bank accounts every business should consider.

A checking account

A business checking account should serve as your company’s main account into which most of your earnings go and most of your expenses are paid. A business checking account works pretty similarly to a personal checking account in that it does not collect interest. There may be an overdraft option.

A few perks to opening a business checking account include being able to apply for a business credit card, establishing a separate credit score for your business and creating a more professional appearance to customers.

Pretty much all banks will have a business checking account option. It’s worth comparing accounts for perks and fees.

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A merchant account

If you want to be able to accept debit card and credit card payments, you will need to set up a merchant account. When someone pays by card, funds are transferred into the merchant account first and then into your business checking account. A fee is charged every time someone pays by card, which is usually small, but can be greater for larger purchases. 

A merchant account can be essential for many industries like retail, hospitality and catering in which many customers expect to be able to pay by card. If you’re setting up an online store, you’ll also need a merchant account as card payments are usually the only form of payment in this case.

Companies in industries that are more at risk of credit card chargebacks may find it harder to open a merchant account. However, there are specialist merchant accounts out there for these industries. For example, Humbold offers high risk merchant services. High risk merchant accounts may come with greater fees, but this is typically still worth the option of being able to accept card payments.

A savings account

Finally, it could be worth setting up a business savings account. Like personal savings accounts, these accounts allow you to collect interest on any funds you deposit in them. 

It’s a good idea to regularly set aside some of your earnings into a business savings account. These savings could be used to pay for unexpected expenses or you could use them to fund your company’s growth. Either way, they can reduce your reliance on loans by providing a financial cushion.

There are many different business savings accounts out there to choose from. Take your time to compare interest rates. Consider the fact that some savings accounts may require minimum balances in order to collect interest and may not pay you interest if you withdraw from them. Nerdwallet compares a few different business savings accounts.

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