So you’ve started your business? Great!
Now it’s time to start thinking about startup bank accounts. According to Statsita, there are over 4000 Federal Deposit Insurance Corporation (FDIC) insured commercial banks in the United States. That’s an overwhelming number and it can be daunting figuring out which bank provides the best startup bank account for your specific needs. But not to worry; we’ve gone ahead and done the research for you!
Read on to learn more about the different types of alternative startup bank accounts including their benefits, limitations, and our pick of the best providers for each so you can feel well-informed when you make your next big financial decision.
A business checking account is the most commonly used account by businesses. It works similarly to a personal account; you can deposit and withdraw money, transfer funds and make payments. Additionally, you’ll typically be issued a debit card and a checkbook. Furthermore, you can easily manage your checking account through online banking with most providers.
Benefits: you’ll receive unlimited access to funds, low opening deposits, and these accounts are eligible for FDIC insurance coverage.
Limitation: you can’t earn interest on your funds with a checking account. Although interesting-bearing checking accounts do exist, they are somewhat rare.
Our pick of the best checking startup bank accounts:
A business savings account is perfect if you’re looking to put aside your surplus cash to earn interest. This type of account will give you the ability to do just that. However, it’s important to mention that federal law restricts you to six free withdrawals per month and most banking institutions don’t allow you to withdraw cash from this type of account using an ATM.
Benefit: unlike a checking account, you can accrue interest on your money with a savings account.
Limitations: this type of account usually has higher opening deposits and you’ll have restricted access to funds.
Our pick of the best savings startup bank accounts:
A business certificate of deposits (CD) account is an alternative to a savings account. With this type of account, you can earn more in interest than you can with a savings account. However, the catch is that you can’t touch your money for a set amount of time. This is referred to as the CD term and can vary from a few months to several years. This type of account is ideal for locking away your surplus cash for a period of time to grow in value. However, bear in mind that if you withdraw the funds before the CD term is complete, you’ll be required to pay a heavy penalty charge and potentially forfeit a portion of your interest earned.
Benefit: you can earn interest on your extra funds with a CD account.
Limitations: this type of account is restrictive in terms of lock-in periods and will usually require a minimum deposit.
Our pick of the best CD startup bank accounts:
A merchant account gives you the ability to provide debit and credit card transactions. When a customer pays you, the money will enter this account and be automatically transferred to your other business bank accounts once the payment has been processed.
Benefit: this account gives your business the ability to receive card payments from customers.
Limitation: with this type of account there are usually fees for application, set-up, per-transaction, and early termination.
Our pick of the best merchant startup bank accounts:
A business money market account (MMA) is an interest-bearing account that includes some of the features of a business checking and savings account. This type of account offers a higher interest rate, debit cards for ATM withdrawals, and check-writing capabilities.
Benefits: with this type of account, you have more access to your money and providers typically offer insurance.
Limitations: this type of account requires minimum deposits, typically incurs fees and your transactions can be limited.
Our pick of the best MMA startup bank accounts:
A multi-currency account can also be referred to as a foreign currency or borderless account. They’re ideal for importers and exporters who pay or receive funds in other currencies as they allow account holders to receive funds in multiple foreign currencies.
Benefits: this type of account can hold multiple currencies and can earn interest depending on the provider you choose.
Limitations: with this type of account, high minimum deposits are needed and fees are usually involved. Furthermore, it’s important to note that your total balance will fluctuate as currency values change.
Our pick of the best multi-currency startup bank accounts:
When selecting the best type of startup bank account, it will help if you have a understanding of what your business will need to do with its finances. Ask yourself the following key questions to help guide your decision:
Once you have these basic questions answered, it should not be too difficult to know where to start. If intersted, you can read more about how our startup founders chose their bank accounts here.
In the end, most businesses will need several different bank accounts and managing your finances across multiple platforms and providers can quickly become a challenge. The most important thing here to remember is, don't waste too much time on this and get back to focusing on making your startup a success. Good luck.
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