Business banking can be challenging. The main issue is that there are various types of business accounts, and deciding on the best one can be confusing. This article will show you the different types and their purposes to help you select a suitable one.
Business Checking Account
A checking account is used to deposit, send, and withdraw money for everyday transactions. You can open one for your business, which will allow you to move funds conveniently. You can send using wire transfers, checks, electronic transfers, etc., and withdraw by visiting the bank or an automated teller machine (ATM). Deposits are similarly easy; you can do that at your bank or through online money transfers.
Many business checking accounts have integrations with business management software. For example, you can integrate it with your accounting software such that it automatically records any deposit or withdrawal. This will make it easy to monitor your finances and prepare financial statements when needed.
Note that many business checking accounts limit the number of monthly digital money transfers and other transactions that you can perform, unlike personal ones.
Savings Account for Businesses
This type of account lets you keep funds and earn modest interest. It’s ideal for storing operating profits that you don’t expect to use in the near term. The tradeoff is limited access because the number of withdrawals you can make each month is limited, and most banks won’t let you write checks or use an ATM card to withdraw money. Also, note that some banks limit the number of deposits you can make each month.
Investment Account for Business
This is an account registered in your business’s name that allows you to buy and sell investment assets like bonds, stocks, mutual funds, etc. It’s offered by brokerages and is ideal if you have operating income that you want to set aside for a long time. A registered investment advisor will invest on your behalf and collect fees for their service.
Trading Account for Business
This is similar to an investment account, as it lets you buy and sell different types of assets. The difference is that you can direct the trades by yourself, which is meant for short-term investments. Investment accounts often have lock-up periods of between 1 and 3 years, while trading accounts let you remove your money at any time.
Money Market Account
This is an interest-earning account that blends the features of savings and checking accounts. This type pays a higher interest rate than others, which comes from lending to other businesses. They also offer insurance to prevent you from losing your funds. The drawback is that they require minimum deposits and have significant fees.
Deposit Account Certificate
These are accounts that offer even higher interest than money market accounts. However, they are unsuitable for keeping operating expenses. In exchange for the higher interest, you’ll agree not to touch your funds for a specific period called the CD term. The longer you commit, the higher your interest is. You’ll pay steep penalties if you decide to withdraw your funds before the agreed time.
Foreign Currency Accounts
This type lets you hold multiple currencies and earn interest. It is ideal for businesses with global supply chains that need to pay suppliers in different countries. You can open it in an onshore or offshore bank. The drawback is that they require high minimum deposits, and your balance can fluctuate along with the currency markets.
We’ve explained the different types of business accounts you can open and the advantages and disadvantages of each one. You can visit the bank branch to open one or open an online business account without having to visit the bank. With the information we’ve provided, you shouldn’t find it difficult to select a suitable online business banking partner, e.g., Silverbird, which lets you store, send, and receive over 30 currencies.