How To Open A Business Bank Account

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How To Open A Business Bank Account – Small business owners need to know what the purpose of each is, what their key features are, and how opening one will affect their business.

In short, if you want to receive credit card, debit card and other online payments from customers, you need to open two types of accounts.

How To Open A Business Bank Account

How To Open A Business Bank Account

After reading this article, you will have a basic understanding of the basics of both accounts. You’ll also learn how they differ and how they can benefit your small business.

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A merchant account is a type of business bank account that allows businesses to accept credit and debit card payments as well as online payments.

Online businesses collect information about these free payment methods through payment gateways like the ones listed below.

When customers enter their card or enter their card information into a payment gateway on a business website or app, the information is sent to the merchant bank, the bank that issued your merchant account.

This bank then facilitates communication between the various parties involved in the processing of cashless payments and ensures the correct transfer of funds from the customer’s account to your account.

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First, the receiving bank sends the transaction information to the customer’s card issuer, also known as the card issuer, who verifies that they have sufficient funds to make the payment.

The card issuer approves or rejects the transaction and then sends its response in data format back to the electronic terminal where the customer paid.

Once the issuer approves the transaction, the payment is processed and transferred to your merchant account, where it is held for an average of 24-48 hours before it is transferred to your business bank account and becomes available.

How To Open A Business Bank Account

It all happens in a matter of seconds and there are different fees for the merchant account holder which vary depending on the service provider.

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These fees typically range from 1.75% to 3% of the dollar amount of each transaction, plus 20 to 30 cents per transaction.

For example, popular merchant account provider Square has a 2.6% + 10 cent fee for contactless payments, chip cards (swiped or inserted), and swipe magstripe cards.

Another reason is that the bank also cannot get money from you by renting you a card terminal.

A business bank account enables business transactions and is a legal requirement for all businesses except sole traders.

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This is where funds from the merchant account go, as well as cash and check deposits from your customers.

Business bank account funds are typically used for regular business expenses, such as monthly electricity bills, software subscriptions, or payroll processing costs.

However, a business bank account has some unique features that you should be aware of before opening an account.

How To Open A Business Bank Account

First, most banks charge a monthly or annual maintenance fee to keep your account open. The amount of this fee depends on the bank.

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Bank of America rewards its customers for maintaining high balances, but many banks may take a different approach by charging you to lower your minimum balance.

Some banks put a limit on the number of free transactions you can process in a given time period – usually around 200 per month.

Generally, the more funds you have in your account, the more trades you can make. Banks tend to reward customers for giving them more money.

Finally, business bank accounts often also come with useful reporting tools that can help with taxes, cash flow management, and expense tracking.

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Businesses use a merchant account and business account together to process and accept credit card, debit card and online payments from customers.

When it comes to accepting card payments, the main difference between a merchant account and a business account is that credit card payments made to a merchant account are processed faster than those made to a business bank account.

When a business’s bank account accepts a card payment, the receiving bank and the issuing bank delay the payment until both confirm the transaction.

How To Open A Business Bank Account

A merchant account, on the other hand, bypasses this delay by settling with the merchant in cash, although online transactions may still be pending.

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They verify the merchant through an application process, while for the company’s bank account they simply fill out a few forms.

Another important difference is that business bank accounts allow direct withdrawals and deposits from the account. This cannot be done with a merchant account.

So business bank accounts are primarily used to track and pay day-to-day business expenses such as office rent, salaries or advertising:

After the credit card purchase is approved by the customer, the money is credited to your merchant account.

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From there, you can transfer funds to your business bank account, where you can use them to make purchases, pay bills, and run your business.

Merchant accounts are essential for businesses that want to accept credit, debit and other online payments from their customers without having to wait days for the bank and issuing bank to receive each one. – individual authorization of each transaction.

Allowing customers to pay through cashless and online means has become increasingly important in this economy, which is why more and more businesses are opening merchant accounts.

How To Open A Business Bank Account

If you have an online business, a merchant account is especially important because getting paid isn’t always a realistic option.

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Instead, with a merchant account, businesses can set up online payment gateways where customers can make online, cashless purchases without even having to contact an employee, right from their laptop or phone.

Merchant accounts are also required for brick-and-mortar businesses. Rarely does a company only accept cash. Customers are often confused when they encounter someone who says no to credit or debit.

Even mobile businesses like taco trucks accept credit and debit cards these days. They only use the portable card terminals provided by their merchant account provider.

However, note that before applying for a merchant account, you must also create a business bank account.

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Acquiring banks (merchant account providers) require companies to deposit funds from the merchant account into the company’s bank account, not into a personal checking account or similar.

You can accept payments in different currencies, streamline your cash flow and demonstrate the legitimacy of your business, building authority in your niche.

With every generation relying on cashless payments, it’s important to set up your business with a merchant account to easily process credit cards, debit cards, and other forms of payment online.

How To Open A Business Bank Account

If you want to open a merchant account to collect cashless payments, you need a business bank account.

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Even if you don’t want to offer cards as a payment option, your business is likely required by law to have a business bank account unless you’re the owner.

If you run a corporation, limited liability company (LLP), or limited liability company (LLC), a business bank account is the way to go.

Even sole traders should consider opening business bank accounts, as they provide an additional level of legal protection against lawsuits.

Only the funds in the bank account have been seized. This is one of the many reasons to keep your business finances separate:

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Another benefit of a business bank account is making your business more professional and trustworthy to customers.

By accepting credit and debit cards, shoppers trust that you’re up-to-date.

With a business bank account, it’s also easier to manage your tax preparation. Many businesses pay quarterly business taxes.

How To Open A Business Bank Account

Getting all your expenses and income in one online place makes it easier to assess those quarterly tax payments.

How To Open A Business Bank Account

On the other hand, if a sole trader uses a personal bank account as a depository for customer payments, it can be difficult to determine which income comes from business sales and which comes from your Venmo from a friend or other source disconnected from the Business.

It is also important to note that if your company is selected for an audit and you do not have a company bank account, the auditor may view your personal account.

Another benefit that may not get enough attention is that opening a business bank account is the foundation of a good relationship with the bank, which can help secure business loans and other forms of financing.

It’s a better experience navigating these sometimes difficult financial situations with a bank you trust and enjoy working with.

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The part that should take the most time, because it’s the most important thing to get right, is choosing the best bank for your specific business needs.

That’s why it’s important to set up your business to accept these methods from your customers for free. They will definitely appreciate it.

Both are required to receive these payments, as well as other online, contactless methods, without long delays.

How To Open A Business Bank Account

Regpack founder and CEO Asaf has extensive experience as an entrepreneur and investor. Asaf has built 3 successful businesses to date, all of which have an exit plan or are still profitable and still operating. Asaf specializes in web product development, team building and business transformation from concept to actual profitable entity.Editorial Note:

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