Let me preface this by saying- I’m not some kind of banking or financial genius. I’m a dummy. And I struggled for so long not only to understand the concept of what I needed to do to make business accounts, but also what banks I should chose. I did a TON of research, talked with a bunch of business owners, and let’s be honest- cried a bit out of sheer frustration. Eventually I found a system for my business bank accounts that fits my picky standards and makes all my financial stuff so much easier.
Now that I’ve got it figured out for my own business, I thought I’d help other dummies who might be struggling as well. I’ll teach you the basics to get you started on your first business bank accounts, and show you my favorite banks to work with.
Checking Account = Debit Card. This was what confused me so freaking much in the beginning. If I got a business checking account, doesn’t that come with a debit card and a credit card…? Nope. A debit card draws directly from a checking account. If a checking account hits $0, you simply can’t spend anything. Many banks will let you get multiple debit cards that draw from just the one checking account, but the important thing to know is that a checking account cannot go negative. Your business absolutely needs a checking account- this is where your income will go.
A credit card is a whole ‘nother deal. You might even use an entirely different bank. You don’t necessarily need a credit card, although I recommend one. A credit card can only go negative. So it’s good for making purchases, but you should not have people pay you into your credit card. I like to use my business’ credit card to make every single purchase my business has, but I think it’s especially important to set up any reoccurring subscriptions or monthly payments with your credit card. That way it can’t decline the purchase and potentially shut down your business if you forgot to move money around.
Try to keep up good credit card practices as much as you can. This means making sure you try not to spend more than 30% of your credit limit- using more than 30% of your credit limit may ding your personal credit score. Because credit cards charge you interest the longer a charge sits on your card unpaid, you always want to pay it off as soon as possible.
Use your business debit card to make frequent payments to pay off your credit card. You can transfer money from debit card to credit card. Find a routine that ensures you won’t ever forget to pay it off in a timely manner (timely manner means at least once a month). This might mean you pay off every transaction as soon as you make it, or maybe it means you sit down once a week or once a month to pay off the charges.
Credit cards usually require minimum payments to be made once a month. If you miss those payments, or if you’re late, they’ll charge you extra fees. It could also severely impact your personal credit score, which will make it harder to do things like buy a house, apply for a loan, or get another credit card.
If you make sure that every single purchase comes out of your credit card, and you make sure that every single payment you get goes to your debit card, it makes accounting soooo much easier. To find your total income, just go to your checking account (debit card account) and look at a list of all your deposits. That’s your total income. Simple. To find out your total expenses, just go to your credit card and look at all the charges.
Your business account doesn’t have to be technically classified as a “business account” with the bank. It can be just a regular personal account that you use for business. The most important thing is that your business transactions are separate from your personal transactions. In fact, both of my business accounts are technically “personal” accounts, not business.
That being said, there are some perks to having actual business bank accounts:
Another important thing to note: If you accept checks, you need to pay attention to whether people should be writing checks to your name, or to your business’ name. If you’re a business account, they probably need to make a check out to your business name. If you have a personal account that you use for business, they need to make their checks out to you.
I really recommend using banks that allow for easy savings and categorization. Why not make your life easier, right? Before I started my business, I fell in love with an app called Digit. Basically, you can set up a whole bunch of different folders for each category you want to save for. My Digit account had savings goals and folders for everything, from new shoes, to buying a house. Digit would automatically save for you and put money into all these different categories, or you could manually put money in there yourself. When you were ready to spend it, you would transfer it back to your bank account with one click.
Once you have this kind of folder system in your life, I swear y’all. You can never go back. It’s the best thing ever. So I started the hunt for a business bank account that would let me have that same kind of system built right in.
The problem? Most banks that offer similar systems only offer them in savings accounts- not checking accounts. This means you could only withdraw from your folders 6 times a month! What if I wanted to make more than 6 purchases in a month? That was not going to cut it for me. I needed a bank that had this kind of automatic folder system connected to a checking account- with no limits on how often I could spend.
Like Digit, Qapital can be used no matter who you bank with. You don’t even need to have a checking account with them! Although you don’t need one, I decided to get a Qapital debit card anyway. So my Qapital Debit Card became my business account- and it saves and budgets for me automatically.
This system I have with Qapital works great for me. But remember, I’m a small one-person business. As your company grows and as you start to earn more money or add more people onto your team, you may want to consider other options. You need to decide what is going to work best for you and your individual situation. And of course, consult with your accountant along the way.
If you were feeling totally lost and confused about what to do or who to chose, I hope this post was able to give you some clarity! Or at least some good ideas. I’m sure there’s a ton of people out there with even more great information. If you have a bank that you love to use, let me know in the comments below!
Looking into Qapital? You can get (and give!) $5 using this code: m28qb4xc
Looking into Digit? You can get (and give!) $5 using this link.
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