March 1, 2013
Today’s guest blog post is from John Gower from NerdWallet www.nerdwallet.com
Cut Costs at the Bank
There are a multitude of areas in which a business owner might choose to trim expenses, but one that is often overlooked is the cost of day-to-day banking transactions. You may have had the unlucky experience of incurring bank fees in your personal finances, and the same concern applies to businesses. That’s why shopping around is critical to finding the best bank account for your small business needs.
Maybe your new business needs a financial institution to meet its banking needs. Or perhaps your established business is coughing up large sums in bank fees and service charges with regularity. In either case, it may be time to look for a new business checking account.
Here are three ways to help cut costs at the bank:
1. Know your business banking habits
Opening a business checking account (even online) can be remarkably simple. However, before choosing any account, make sure to check the fine print for requirements that you may not be able to meet. Many of the fees associated with a business checking account are related to the volume and types of your monthly transactions.
If the account charges a monthly service fee, which can be up to $50, will you be able to meet the minimum balance requirements to waive it?
Are there monthly transaction limits for deposits and withdrawals? Banks often levy fees for each transaction above a specified limit, usually 100-200 per month. Fees average about $0.40 per excess transaction, so business owners may rack up extensive charges without careful attention.
Finally, does your business frequently deal in cash? If so, a cash-handling fee will be another obstacle to avoid. A bank or credit union may charge up to $0.75 per $100 cash deposited above a certain threshold (on average, $10,000). This means that enterprises such as bars and restaurants may be forced to pay up just to deposit their funds.
2. Consider “analyzed” business checking
Though perhaps not the best option for all small business owners, analyzed business checking may still be worth investigating. With such accounts, banks charge a fee for each transaction rather than offering some for free, however they use the account balance to determine an earnings credit allowance – a credit that offsets these fees.
Analyzed checking is likely better for businesses with high transaction volumes, who would consistently find themselves breaking the threshold for free transactions with a standard business account. That said, a high balance would also be necessary, or else the earnings credit allowance will not be enough to cover much of the fees.
The rate used to calculate the allowance caries from bank to bank, so inquire around to help determine of an analyzed business checking account is for you.
3. Whenever possible, choose a fee-free account
Without a doubt, the simplest way to cut banking costs is to choose a free business checking account from the outset. These accounts will usually still set a limit on free monthly transaction limits, but they won’t incur a monthly service fee. No monthly fee means no worrying about meeting a minimum balance requirement during slow business seasons or periods of high spending.
John Gower, NerdWallet