opening a business checking account

Business Checking Account

The business checking account is a checking account that is opened for the purpose of running the business. Thus, the transactions made are related to the business activities. It is to be noted here that the checking account is the account that is opened not for the saving purpose but for parking the money temporarily so that the payments can be made in near future. Thus, the business checking account allows the businessperson to deposit the money and then make the payments at the suitable dates. It is quite obvious that the number of transactions as well as the volume transacted is quite high in such accounts as compared to the other types of accounts.

The business checking account is of course the basic account that any business unit opens when the business activity is started. The checks received from various parties can easily be deposited in this account along with the cash and the checks can be issued to the various parties. Also, a businessperson can easily issue checks in the future date, which are of course cleared on that particular date only. Thus, the business checking account makes the financial activities related to the business very easy. There are of course many benefits that a businessperson gets when he opens the business checking account. Let us discuss these next.

VARIOUS BENEFITS OF BUSINESS CHECKING ACCOUNT

Before we discuss the various benefits of the business checking account, it is very important for the reader to note that these benefits of course depends upon the financial institution where the account has been opened. The general benefits that are available in the present times related to the business checking account are: No Fee: In the present times, almost all the financial institutes have done away with the different types of fee they use to charge like the monthly maintenance fee or the minimum balance requirement and the penalty related to that. If a financial institute is still charging these fees, it is better to look for another one.

Number of transactions:

Since there are number of activities that are related to the business, it is quite natural that the number of transactions that would be made by the account
holder would be many. So, most of the financial institutes allow the businessperson to make a good number of transactions absolutely free and there is no fee charge up to that number. Normally these transaction numbers provided are enough and even if the fee has to be paid, it is nominal one. Also, the financial institutions now allow a businessperson to make cash deposits quite frequently in the business checking account. Other Benefits: Apart from the above, there are many other benefits that a person gets when he opens his business checking account. He is issued an ATM card that allows him to take out cash from the various ATMs located across the country and thus, there is no need for him to carry cash all the time to settle the transactions. Also, there is no fee that is attached to this service. This ATM card is debit card also and thus, he can easily make purchases anywhere and can pay by means of it. The overdraft protection is another facility that is being provided by many financial institutions that allow a person or a business unit to open a business checking account. The other benefits include the online alerts, online statements, and the online bill pay. Thus, it can be easily said that there are many benefits that businessperson gets when he opens his business checking account. Let us now see what are the different types of business checking accounts that can be opened.

DIFFERENT TYPES OF BUSINESS CHECKING ACCOUNTS

There are different types of business checking account that can be opened and these cater to the need of the different business types. It is to be understood here that these different accounts have different features so as to fulfill the requirements of different business units and thus, a person should try to open the right account for his business enterprise. The names of the account might differ from one institution to another but the concept remains the same. The first one is the 'business economy checking account'. This is for the start up units and for the small business as there is no maintenance fee attached to this type of account and free online business banking is also offered. For business units with greater number of transactions and higher volume, there is an 'advanced business checking account'. It also does not attract any maintenance fee and the businessperson is also allowed to have a 3 or more additional accounts. If the businessperson is a sole proprietor, the 'business interest checking account' is the right type of checking account for him. The advantage of this type of checking account is that the interest is also payable on the balance maintained by the proprietor in his account. Apart from this, personal checking is also possible and there is no annual maintenance fee that is payable. Given above are the different types of business checking accounts that can be easily opened and most of the financial institutions are providing these accounts. The business unit or the businessperson must open the right type of account for the business so that the desired purpose of opening the account is fulfilled. The requirements for opening the business checking account vary from one financial institution to another and these can be easily known by contacting the concerned official or by logging on to the web site of the financial institution.

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On Tuesday both the House and the Senate passed an amended version of Bill S.896 which includes a provision to extend the temporary increase in deposit insurance from December 31, 2009 to December 31, 2013. This applies to both FDIC and NCUA. You may not hear much about this provision in the media since it's just a tiny part of the bill which primarily deals with mortgage foreclosure prevention and enhancement in mortgage credit availability. The bill passed easily in both the House and Senate, so it appears very likely that it should soon be signed by the President and become law. More information on this bill is available at the Thomas Database page.

This news article also has a good summary of this bill including the deposit insurance provision. In addition to the deposit insurance, the bill also would increase the borrowing authority of both the FDIC and NCUA. This gives the agencies more time to rebuild deposit-insurance funds and provide more flexibility in setting assessments. There's also a provision that should make it easier on the credit unions as the NCUA deals with the losses related to the corporate credit unions.

For the deposit insurance, it's not the permanent increase that many had wanted, but at least it adds another 4 years to the current $250,000 basic coverage. Unfortunately, new 5-year CDs will go into 2014 which will extend past the temporary increase. It's quite possible that it could be extended again, but no one knows for sure.

Once it becomes law, the FDIC and NCUA should provide the official details. It should be basically the same as we have now except that the higher coverage limit won't end until 12/31/2013. So with $250K as the basic coverage limit, joint accounts will be covered up to $500K. Also, extra coverage can still be available through revocable trusts.

The insurance limit change started in late September and early October 2008 after the first bailout bill failed to pass the House. A new version of the bill was written, and it included a temporary increase to the basic FDIC and NCUA deposit insurance from $100,000 to $250,000. This revised bailout bill passed Congress and was signed by President Bush on October 3, 2008. The deposit increase was scheduled to end on December 31, 2009.

Before this $250K coverage took effect, it was possible to extend insurance coverage way above $100K through revocable trust accounts. However, it's not as straightforward as staying under the basic limit. There's always the worry that a FDIC claims agent will find something wrong with how the revocable trusts are done which would reduce the coverage. When you're under the basic limit (currently $250K), there's much less doubt. To review some of these issues, refer to my post on extending FDIC/NCUA coverage.

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Why settle for a interest rate of 1/4 percent on your savings account when you can earn 2.5 - 3.5 percent with an online savings account!
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