What is a business checking account for eCommerce?
A business checking account for eCommerce allows you to better manage your finances. Through the use of accounting software, budgeting tools, and payment processors allows you to monitor your cash flow and expenses, making it easier to simplify financial information during tax season
You can also carry out basic transactions such as cash withdrawals, wire transfers, and mobile check deposits.
Who needs a business checking account for eCommerce?
Businesses with an online storefront should consider a business checking account. Whether you have a store on Etsy, Amazon, or Shopify, a business checking account can help make payments and bookkeeping easier. Some payments processors may require you to have a checking account for your business in place before you can accept payments.
In addition, a business checking account can build a separate credit profile for your business, giving you access to a wider range of financial products that can help your business during periods of growth.
What are the pros and cons of a business checking account for eCommerce?
There are many pros and cons of opening a business checking account for eCommerce. Here are a few for you to consider before applying:
Pros
- Separation of assets: Depending on your business structure, the separation of personal and business finances can provide liability protection for your business if a creditor or third-party files a lawsuit against you.
- Business growth: Using a business checking account can help you build a relationship with your bank and gain access to loans, business credit cards, and other financial products that can help fund future growth.
- Professionalism and credibility: Having a business checking account can portray your business as legitimate and build confidence with your customers.
- Credit history: A business checking account can establish a credit rating for your business and lower your future borrowing costs.
- Simplify taxes: Keeping a record of expenses and invoices will simplify the work you have to do during tax season.
Cons
- Fees: Different rules and fees apply to a business checking account compared to a personal checking account. As an eCommerce business, you are likely going to have a larger number of transactions that can incur various fees.
- Minimum balance: Many banks may require you to maintain a minimum balance in your business checking account. If you fall below the minimum balance requirements, you could be charged additional fees.
- Business is a side hustle: If you’re trying out a new business venture or a side hustle, the fees imposed may seem high at the beginning compared to your revenue.
What are the fees for a business checking account for eCommerce?
Here are a few fees for you to consider when looking into an account for your business:
- Monthly fees: This is the cost of maintaining your business checking account each month. Many online banks waive this fee and others require a minimum balance for fee-free banking.
- Transaction fees: As an eCommerce business it is likely that you will have a large number of customer transactions to process. Look for banks that allow you to carry out a high number of transactions without a fee to account for future growth.
- ACH and wire transfers: Many banks will charge a fee for ACH and wire transfers.
- Foreign transaction fees: If your eCommerce store accepts international payments, foreign transaction fees may apply.
- Overdraft and insufficient funds fees: If your available balance becomes negative, you may be charged interest and a fee for transactions.
In addition, there may be fees for software or accounting integrations, paper statements, and replacement debit cards. It’s a good idea to read the terms and conditions before you open a business checking account, to ensure that you are aware of all the applicable fees.
What are the alternatives to a business checking account for eCommerce?
When opening a business checking account, you may want to consider opening additional accounts to support your business operations.
A savings account can help you put aside money for unexpected expenses or fund the growth of your business. Look out for account fees and balance requirements when opening a savings account. You should ensure that any fees are offset by the interest received on funds. A high-yield savings account typically offers a yield above the national average.
Alternatively, if you plan to receive payments in multiple currencies, a foreign currency account can come into use. It can help lower the fees from foreign currency conversions and make it easier to do business with overseas customers.
Finally, if you expect a high number of debit and credit card transactions, a merchant account could be beneficial for you. The ability to process online payments can streamline the payment process for the customer and improve cash flow.
How to choose a business checking account for eCommerce
When looking for the best business checking account for an eCommerce store, here are some key factors to consider before you choose a bank:
- Tools and integrations: Accounting software and payment integrations can help you streamline your business finances and monitor your cash flow more easily. Look out for services such as Stripe, Wise, FreshBooks, and Quickbooks.
- Business growth: Consider the longevity of your business and how you plan to finance future growth. Does the bank offer business loans and credit cards? Can you open a credit line? Access to financial products could be vital for future business success.
- Transaction limits: As an eCommerce business, you are likely to process a large number of transactions. Small fees can add up over time and eat into your profits. Look out for banks that offer unlimited fee-free transactions.