Choosing the right business bank account for your business is an important consideration, and these days, there is a wealth of banking options for both major high street banks and digital institutions that can be enticing. However, not all business banks are equal, and much like personal accounts, they will offer something different to try and gain your business.
However, is everything as attractive under the surface as it seems on top? Oftentimes, the dangling carrot might look good, but once you get past its initial allure and take a closer look, the carrot might not be as enticing and might even be a little bit rotten once you start peeling it.
But enough about the vegetable comparison. What exactly should you look for in your business account, and what should you be aware of before signing up for and opening your new business account?
Account fees
Understanding all account fees is crucial for making informed financial decisions. Major business bank accounts should clearly signpost all fees. If fees are hidden or difficult to understand, it could indicate the presence of hidden fees or penalties for certain activities. By being aware of these fees, you can take control of your finances and avoid any unexpected costs.
Some business banks have monthly charges or annual fees. Others might charge transaction fees from the beginning or once you meet a certain threshold. Others might just charge for everything they can. The fees will need to be factored into your business expenses, so it is important to understand what fees you can expect to pay and when so you can ascertain whether it is a good deal or not.
Benefits and features
All bank accounts will come with perks and offers to entice you in. These could be things like cashback on certain transactions, free business tools, or discounted services. But before you are wowed over by all of the bells and whistles, check if you actually need them. They might just be that shiny object that is there to grab your attention and lure you in, and actually, you don’t even need it.
Whether you choose a business account that does your taxes, integrates with software you use, has invoicing tools, or can chase payments on your behalf, understand the perks of the account you’re considering and make sure you don’t just want the features included but need them and will get value from them too.
Take the time to do a full comprehensive analysis and compare each deal, looking for the different pros and cons of each one and ensuring it aligns with your needs as a business. For example, if you’re going to deposit cash or cheques frequently, you need an account that allows you to do this on a regular basis. Or if you’re going to rely on your bank for a change for the shop, understand if this is allowed, if any charges are attached, or if you get a free monthly quota, as this will be more valuable than other perks that might be on offer.
Customer support and account management
What level of support is offered for the account, and what do you expect from the bank regarding helping you with your finances and banking needs?
Will you be able to access support at the local branch, or is everything online only? Are there limited hours of operation, and how easy is it to contact someone in an emergency? Are they open weekends to help you if you trade over the week, or is 24/7 support not an option? The operational timings of your business might not fit into the neat 9-5 that many physical banking branches operate by, and if you cannot contact someone outside of the “working week,” it might not be the right account for you.
Overdraft facilities
Not all business bank accounts offer an overdraft facility, and if they do, you need to understand the terms of usage and charges applicable for accessing an overdraft. If this isn’t something you want or need, you don’t need to explicitly look for accounts offering this, but if it is of value, make sure you check the eligibility criteria to see if you qualify and understand the rates and charges or sign up for this feature.
Interest rates
Does the bank you are considering pay interest on your account, and if so, how much? Not all business banking accounts offer interest paid on balances, and if they do, there might be restrictions on new accounts as to how much you need in an account before you accrue interest or what you earn in any tax year.
Financial protection
All high street banks offer financial protection as standard under the FSCS (Financial Services Compensation Scheme). Some online banks will offer this, too, but it’s important to check before you commit to opening an account with them.
The scheme covers deposits up to £85,000 per banking institution in the event the bank goes bust. However, it’s essential to understand that some online only banks don’t offer this protection but rather hold your funds in a segregated account. This account will be protected by safeguarding requirements under the Electronic Money Regulations 2011. If you are happy with this option, then you can choose to open an online account, but if you prefer the protection of FSCS, then you need a banking institution that explicitly states it offers this.
International transactions
If you accept international payments, then you need to make sure your bank offers the ability to make or receive international payments and what the fees are associated with this type of activity. For example, you might find you can hold balances in different currencies within your account, or some banks might offer a debit card you can use overseas to make business purchases without being charged. If you need this feature, explore the implications of international payments and ensure you’re happy with the deal offered.
