6 Types of Bank Accounts for Small Businesses

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A good business bank account is necessary if you have just started a new business or are thinking of starting one. But setting up one can quite be an intimidating task. There are innumerable options that have been discovered to help you effectively manage your money. And each has its own features to serve a different purpose. 

We have come up here to let you know six types of bank accounts for small businesses that can help you arrive at the right decision. Let’s get started.

Savings account

Want to grow the extra funds and experience the growth in its value? Go for the business saving account. The funds that you store in this account let you earn the interest on those savings. But don’t forget that federal law has a restriction of six fee-free withdrawals, and most accounts don’t give permission to write cheques or withdraw money from the ATM. A savings account is a good choice if you have excess capital. It helps you earn higher returns. It acts as a financial cushion for your business.  

Business checking account

The best type of account to open for small businesses is the business checking account. Why? Due to the less number of restrictions on your money. You can withdraw your funds in several ways. For instance – Cheques, electronic transfers, debit cards, or ATM transactions. Checking accounts are said to integrate with some business tools like accounting software which can save you from the hassle of manually transferring the details of your every transaction. Thus, if you want to cover your business expenses, keeping the money in a business checking account can work well. 

Money market account

It is an account having both the features of savings and business checking accounts. Money market accounts pay higher interest rates and also have cheque-writing capabilities. However, it also has the same limitation as that of a savings account regarding the withdrawal limit. But if the bank is offering high-interest rates to you, opening a money market account is the way out. You just have to keep in mind its restrictions so that you don’t have to compromise on locking away the capital.  

Certificates of deposit account (CD)

CD is termed as an alternative to the savings account that can give you a higher rate of interest than a savings one. But here is the catch: you can’t touch or withdraw your money for a said period of time. The time period could range from a few months to several years. It is said that the longer the term, the higher the returns. And if you withdraw the money before the completion of the said period, you will be charged a penalty. A CD is appropriate if you want to cover the operating expenses. Moreover, if you are sure that you won’t need money before the maturity date, the CD is the best way you can secure your funds for higher interest. 

Foreign currency account

Foreign currency account is also known by the name of a borderless or multi-currency account. It is especially meant for exporters and importers as they make payments or receive them in another currency. Onshore or offshore banks maintain these accounts. The best part of having a foreign currency account is to hold multiple currencies. Your business just needs to have high minimum deposits in the account. Remember that your money in the account will definitely have to bear the effects as the currency value changes. 

Merchant account

A merchant account works wonders for a small business that accepts all credit card and debit card transactions. When a customer makes a payment to your business using a card, the money goes into the merchant account, and then automatically gets transferred to the other business bank accounts. Before you decide to get your business a merchant account, it is advisable to carefully read the instructions and fine print of the agreement.

Which account should I choose for my business?

Your business will surely need at least one of the above-mentioned accounts. Some of them may even need more than one. Pay attention to your goals before opening any type of bank account. For instance – Do you need only a temporary place to hold your income while paying for the operating expenses? The answer is to open a business checking account. 

Want to keep extra earnings? Go for the CD or savings account.  

There is no such rule that says you can keep only one business account for all the transactions. But keeping only one account makes it very easy to manage the money.  

Always keep in mind to look at the options you are getting with each deal and grab the suitable one for your business.  

To make a long story short.

There is no one-size-fits-all solution for your business to open a particular bank account. With the information provided above, we have that it will make you choose the right one much simpler for your business.

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Meet Waleed Tariq, the seasoned entrepreneur and visionary behind the blog. Get ready for valuable business insights, practical tips, and a fresh perspective that resonates with all – from aspiring entrepreneurs to seasoned professionals. With a passion for empowering others, Waleed's engaging writing style and real-world experiences simplify complex business concepts.

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