Why do you need a business checking account?
When it comes to business accounts, a common question is whether or not to use business checking vs. personal checking. Here are some advantages of having a business checking account:
- You can earn interest on your money: You might not be making a a lot on your checking account, but you can potentially get more interest by using a business checking account than you would with a personal checking account (depending on the rates and terms).
- Easy-to-use services: Business checking accounts typically include many different services, such as electronic bill payment and the ability to cash checks at banks or other locations. These features make it easy to perform routine tasks without the hassle of dealing with multiple companies.
- Integrated account information: Most business checking accounts provide access to your financial information through online banking. Through this service, you can easily see your account balance and recent transactions, as well as pay bills online.
- Taxes: During tax season, it will be easier to determine the amount of taxes you owe or don’t owe by keeping your accounts seperate.
What do you need to open a business checking account in Rhode Island?
To open a new business checking account, you’ll need the following:
- Identification: Copy of your driver’s license or other government-issued picture ID
- Proof of business ownership: You will probably be asked for your articles of incorporation, which is the official document that establishes your business as a legal entity.
- Proof of address: The best way to do this is with a utility bill that has been mailed to your home in the past 90 days. If you don’t have one, then any other form of official documentation can be substituted: a tax return, lease agreement, car registration, or anything else that has your name on it and shows where you live.
- Business license or LLC certificate: This is used to verify the legitimacy of your business.
- TIN (Taxpayer Identification Number): If your business is a corporation or an LLC, it will have a TIN number (also called an Employer Identification Number). If your business is an individual, you’ll be using your Social Security Number as your TIN.
Common business checking account fees in Rhode Island
Trying to save money on business checking account fees doesn’t mean sacrificing banking services. It just means picking the right account and choosing the right features to avoid unnecessary charges. Here are common business checking account fees and how to avoid them:
- Monthly service fee: Though these fees vary by institution, many banks charge businesses an average of $15 per month for their checking accounts. To avoid this charge, opt for an alternative checking account that doesn’t have a monthly fee. These accounts usually require a minimum balance in order to waive the monthly fee, but the amount is usually fairly low — often under $1,000.
- Minimum monthly balance: This fee is based on the amount of money in your account each month. Most banks charge this fee if you fail to keep a minimum balance in your account each month. If it’s too expensive, look for an option without one or try to schedule more money into the account towards the end of each month when there are fewer checks being written.
- ATM transaction fees: If you use out-of-network ATMs, you’ll be charged a fee by your bank. This is usually $2-$3 per transaction.
- Stop payment orders: If you need to stop payments on checks or ACH transactions, expect to pay a fee ranging from $10-$25.
- Nonsufficient funds (NSF) fees: When a check was written from your business checking account bounces due to insufficient funds, you are charged an NSF fee by your bank. The amount of this fee depends on your institution as well as state and federal laws.
How to choose the best business checking account in Rhode Island
With all the checking accounts available, it’s hard to know where to start. So here are some tips to help you find a checking account that fits your needs:
- Check the fees: Before signing up for a checking account, request a copy of the bank’s fee schedule and review the monthly maintenance and service charges. Avoid high minimum balance requirements and overdraft charges — they can eat away at your profits before you even get started. If the bank doesn’t waive its monthly maintenance fee, ask if there are any ways to avoid it.
- Free online banking: You want to be able to access your account information online so that you can check your balance and pay bills on the go. A good account will allow you to do this without any hassle or additional fees.
- No minimum balance requirement: If you’re a small business owner, chances are that your cash flow is quite variable from month to month and week to week. Having a bank that doesn’t require a minimum balance can mean better cash flow management for your company.
- Teller services and hours: Banks that offer teller services can be convenient if you want to stop in for help with a problem or just deposit a check-in person. Some banks even offer extended hours, which might be ideal if you prefer to conduct transactions during non-traditional times of the day.
- Interest: It’s nice to have your money make money for you, but interest rates can be low. Most businesses that keep money in checking accounts earn less than 1 percent interest per year, which may not add up to much of a return over time.