If you’re engaged in finance even a little bit, you may already be familiar with the term “business bank account.” Generally speaking, it’s a type of bank account that is specifically owned and set up by businesses and is directed strictly for the financial affairs of the business operations. One of the most well-known examples of such is a Chase business account. Chase Bank offers signing bonuses of up to 300$ this month of January 2023 for those who open a business account with them. As such, if you still don’t have a separate bank account for your business, you should definitely consider applying for one through Chase.
In this article, we are going to discuss the different types of business bank accounts to give you a rough idea of what type of account will benefit you the most.
Checking Account
This first type of account is the most common type there is. Checking accounts are typically set up for regular transactions, including but not limited to making deposits, writing checks, and electronic fund transfers. The highlight feature of checking accounts is that they allow for easy and convenient access to funds. Considering the nature of checking accounts, they are most applicable for things like paying employees’ salaries, bills, and suppliers’ invoices. When you open and set up a checking account, you are typically given a checkbook and a debit card.
Savings Account
Aptly named, savings accounts are directed towards holding the funds passively with the goal of growing the funds through earning interest. Savings accounts are strategically used by businesses to save up for long-term financial goals or for future expenses and investments. Given the nature of savings accounts, the money inside should be kept dormant for prolonged periods of time. As such, it should only contain money that is not currently being used in the regular course of business operations. Being mainly directed toward long-term financial goals, the funds contained inside savings accounts are typically kept for a period of 1-5 years.
Money Market Account
Money market accounts work quite similarly to traditional savings accounts. Unlike traditional savings accounts, however, money market accounts are often offered with higher interest rates. But this does not come without a catch. Money market accounts also come with a higher minimum balance requirement, and the transactions you can perform each month are also quite limited. This only means that the barrier to entry for money market accounts is high. This type of account is best suited for businesses that have plenty of excess cash and want to earn more on their investment.
Certificate of Deposit (CD)
A CD is yet another type of savings account. This type of savings account features an arrangement where the money is deposited to the bank for a fixed term, and attached with it is an interest rate typically higher than that of traditional savings accounts. CDs typically last anywhere between a few months to a few years. Due to their high-interest rate, as well as being insured by the Federal Deposit Insurance Corporation (FDIC), CDs are considered a great option for a low-risk investment. CDs are best suited for those business entities that have the luxury to afford to lock their funds away for a prolonged period of time.
Merchant Services Account
Merchant services accounts are quite common in businesses that sell goods and offer services. This type of account is used for processing debit and credit transactions. Essentially, this type of account allows the business to accept various forms of payments from customers, such as electronic payment card transactions. This means that the business can cater to a variety of customers who intend to pay through means other than cash. Since this is a type of business account, you’ll need to have a business license to apply for one.
