Types of business bank accounts: A guide for new business owners

 

Starting a new business is an exciting journey, but it also has its fair share of challenges — especially when it comes to managing finances. One of the first steps in establishing your business’s financial foundation is choosing the right types of bank accounts. With many different types of bank accounts for businesses available, it’s essential to understand the purpose and benefits of each type of business banking account to make informed decisions that align with your business goals.

 

The top types of business bank accounts

Business checking account

A business checking account is often the first bank account a new business opens. Similar to a personal checking account but designed specifically for business transactions, it serves as the primary account for managing daily financial transactions — including paying bills, receiving payments and handling payroll.

These types of business accounts allow businesses to manage their cash flow efficiently while keeping their personal and business finances separate, which is crucial for legal and tax purposes.

What a business checking account offers:

• Simplified transactions: Different types of business checking accounts enable seamless transactions, whether you’re making payments to vendors or receiving payments from customers.
• Expense tracking: A business checking account helps you track business expenses, making it easier to manage your budget and prepare for tax season.
• Access to business services: Many banks offer additional services with a business checking account, such as payroll processing, merchant services and business credit cards.

When might you need one?

If your business handles regular transactions, such as paying suppliers or receiving customer payments, a business checking account is essential. It’s also important if you want to establish business credit and maintain a professional image with your clients and vendors.

 

Business savings account

A business savings account is designed to help your business grow its funds by earning interest on deposits. It’s similar to a personal savings account but is tailored for business purposes.

A business savings account serves as a financial safety net, allowing businesses to set aside excess funds for future use or emergencies.

What a business savings account offers:

• Interest earnings: Business savings accounts typically offer interest on the balance, helping your business funds grow passively.
• Financial cushion: A business savings account can serve as an emergency fund, providing a financial buffer during slow periods or unexpected expenses.
• Goal-oriented savings: You can use a business savings account to set aside money for future business investments, such as equipment purchases or expansion.

When might you need one?

If your business has surplus cash that you don’t need for immediate expenses, a business savings account can be a smart choice. It’s particularly beneficial for businesses looking to build a financial safety net or save for long-term goals.

 

Merchant account

A merchant account is essential for businesses that accept credit and debit card payments. It acts as an intermediary between your business and payment processors, enabling secure and efficient card transactions.

This account links directly to your business checking account, where the funds from card transactions are ultimately deposited after processing.

What a merchant account offers:

• Card payment processing: A merchant account enables your business to accept various forms of card payments, which is essential in today’s cashless economy.
• Improved cash flow: Payments made through a merchant account are typically processed quickly, improving your business’s cash flow.
• Increased sales opportunities: By accepting card payments with a merchant account, your business can cater to a broader customer base and potentially increase sales.

When might you need one?

If your business plans to accept credit or debit card payments, whether through a physical terminal, online store or mobile app, you’ll likely need a merchant account. It’s particularly important for retail, eCommerce and service-based businesses.

 

Business money market account

A business money market account combines the features of a savings account with the ability to write checks and access funds more easily.

This type of account typically offers higher interest rates than a standard business savings account, along with limited check writing and debit card use.

What a business money market account offers:

• Higher interest rates: Business money market accounts often provide better interest rates than traditional savings accounts, allowing your funds to earn more interest.
• Liquidity: While business money market accounts offer interest-bearing savings, they also provide easy access to funds, with the ability to write checks and use a debit card.
• FDIC insurance: Like other business accounts, money market accounts are insured by the Federal Deposit Insurance Corporation (subject to maximum limits), adding a layer of security for your funds.

When might you need one?

A business money market account is ideal if you want to earn higher interest on your funds but still need occasional access to the money. It can be a good option for businesses that want to balance saving and liquidity.

 

Foreign currency account

A foreign currency account is valuable for businesses that operate internationally or deal with foreign currencies regularly.

This account allows businesses to hold and manage funds in a foreign currency.

What a foreign currency account offers:

• Currency management: Holding funds in a foreign currency can help your business manage exchange rate fluctuations and reduce conversion costs.
• International trade efficiency: Foreign currency accounts simplify transactions with international partners by allowing you to send and receive payments in the relevant currency.
• Hedging against currency risk: By holding funds in foreign currencies, your business can hedge against potential losses due to currency exchange rate movements.

When might you need one?

A foreign currency account is essential if your business frequently deals with international clients or suppliers. It’s particularly helpful for businesses looking to minimize currency conversion fees and manage exchange rate risks.

 

Business certificates of deposit

Business certificates of deposit (CDs) are ideal for businesses that have funds to which they don’t need immediate access and are looking for a safe investment with higher returns.

A business CD is a time deposit account where you agree to leave your money for a fixed period, typically earning a higher interest rate in return.

What a business CD offers:

• Fixed interest rates: Business CDs offer a fixed interest rate for the term of the deposit, providing a predictable return on your investment.
• FDIC insurance: Like other business accounts, CDs are insured by the FDIC, subject to maximum limits, making them a low-risk investment.
• Higher yields: Because you commit to leaving the money untouched for a set period, business CDs generally offer higher yields compared with other savings options.

When might you need one?

A business CD is suitable if your business has surplus funds that it won’t need for a while and you’re looking to earn a higher return without risking your capital. It can be a good choice for businesses looking to make a low-risk, interest-bearing investment.

 

Multi-currency account

A multi-currency account is ideal for businesses that operate in multiple countries, because it allows you to hold and manage several currencies within a single account.

This account simplifies financial management and reduces the need for multiple accounts in different countries, making international transactions more efficient.

What a multi-currency account offers:

• Convenience: Manage multiple currencies within a single account, streamlining your international transactions.
• Reduced conversion costs: Multi-currency accounts help you avoid frequent currency conversions by holding funds in the currencies you need.
• Improved cash flow management: With a multi-currency account, you can manage your global cash flow more effectively by matching revenue with expenses in the same currency.

When might you need one?

If your business operates globally or deals with clients and suppliers in different countries, a multi-currency account is a valuable tool. It’s particularly beneficial for businesses looking to simplify international transactions and reduce currency conversion fees.

 

FAQs: Different types of business bank accounts

Do I need every type of business bank account for my business?

Not necessarily. The types of accounts you need depend on your business’s financial activities and goals. Most businesses start with a checking account and add savings or merchant accounts as needed. If you deal with international transactions, you may also consider a foreign currency or multi-currency account.

 

What are the essential business bank accounts for startups?

For most startups, a business checking account is essential for managing daily transactions. A business savings account can also be beneficial for building a financial cushion. Depending on your business model, you may also need a merchant account to accept credit card payments.

 

Can I use a personal account for my business?

While it’s possible to use a personal account for your business, it’s not recommended. A separate business account helps you keep personal and business finances separate, which is important for legal, tax and professional reasons.

 

When should I consider opening a foreign currency or multi-currency account?

Consider these accounts if your business regularly deals with international clients or suppliers, or operates in multiple countries. These accounts can simplify your financial management and reduce the costs associated with currency conversions.

 

How do I choose the right business bank accounts for my needs?

Start by assessing your business’s financial needs and goals. Consider the volume and type of transactions you’ll be handling, your need for interest earnings and any international operations. Consult with a financial advisor or banker to help determine which accounts are best for your business.

By understanding the different types of business bank accounts available, you can make informed decisions that align with your business needs and help set your company up for long-term financial success.

 

Learn more and open the business bank account that’s right for you

To learn more about the different types of business bank accounts that Chase offers and what you need to open them, reach out to a Chase business banker.