This post is constantly being updated with the latest news and banking info available. Recently updated in December 2016.
As a self-employed freelancer, most of my financial business is done online or with mobile apps. But choosing the best business checking account can be daunting. Plus, you want to make sure you don’t spend extra money on fees.
I’ve seen the benefits of technology and how going digital makes me more productive and streamlines my life. Oddly enough though, many consumers and small business owners (about half) still bank at traditional banks!
It’s time you embrace technology and the benefits it offers, by finding the best business checking account. And don’t forget to download the free checking account checklist!
1. Always separate business & personal accounts
If you do nothing else for your business opening a separate business checking account is a must! The main reason is because it will be a whole lot less of a headache for you. By separating your business transactions you create a line between professional and personal.
This is especially handy come tax time when you create year-end reports for your bookkeeper or CPA. And if you’re ever audited, you can prove your business is legit much more effectively. Besides, you wouldn’t want the IRS (or your CPA) poking through your personal income and expenses in order to locate your business transactions. Would you?
You can also customize the name on your account, and your checks, so you appear more credible to other contractors and freelancers you pay. Even if your business isn’t a LLC yet, you can still apply for a DBA (Doing Business As certificate) and different Tax ID number.
Lastly, another advantage is that you can link your bookkeeping software to your dedicated business account, which makes it super easy to print out monthly and yearly reports. You won’t have the hassle of excluding personal transactions from the business ones while categorizing them.
For my Chase business checking account income and transactions I use QuickBooks Self-Employed to track the different types of income sources (PayPal, direct deposits, checks) and to calculate quarterly taxes.
For the simplicity of all these factors and that it casts a more professional light on your business, it’s vital you open a business checking account.
Keep in mind that this is in addition to the business credit card that you may also have. Credit cards are a great way to generate start-up capital, provided that you use them properly. Look for a card that doesn’t cost anything in annual fees, allows you to implement spending limits, and that provides you with protection should your card fall into the wrong hands.
2. Consider using personal bank accounts
To start it’s important to understand the type of business you’re operating. You can be a freelancer who is a sole-proprietor and don’t necessarily need to open a “business” checking account.
In the eyes of the IRS, a sole-proprietor isn’t a legal business entity like an LLC or corporation is, so you can save money by using a personal bank account for business purposes.
The main reason for this is because my business is still small enough so it isn’t super complicated or have mega amounts of income every month. This also allows me to avoid the costly monthly fee that’s usually associated with a business account.
Be sure to download the free checklist to follow along and compare each of these banks side-by-side.
The following content is divided into two sections:
- Personal checking accounts that can be used for business purposes (non-LLC)
- Business bank accounts that must have a business name and ID number separate from your personal information (LLC)
The best banks for personal checking accounts (non-LLC)
The below checking accounts are ones that I personally use and can recommend with certainty that they are excellent options. If you have any questions about them, contact me and I’ll do my best to answer.
Capital One 360
While this bank used to be called ING Direct, I’ve had no issues with the Capital One takeover and still enjoy this bank as my account. Capital One 360 accounts come with no minimums, no fees, and free checks, so it’s a no brainer for me and my business.
A Capital One 360 account provides customers with a free MasterCard debit card, access to 38,000 fee-free Allpoint ATMs and 2,000 fee-free Capital One ATMs, as well as free mobile check deposits.
These features are super useful since a lot of my business is done virtually and on-the-go and since Capital One Banks are pretty popular (at least in the South) I can find an ATM whenever I travel.
One of the things that I like most about Capital One 360 is the fact that you can have multiple checking and savings accounts — and they now have separate business savings accounts that have zero fees and offer 0.40% interest. This is very convenient for setting aside funds for income taxes throughout the year, money for conferences and business events, as well as a business emergency fund.
Additionally you can set up goals for your various accounts and track your progress throughout the year. This is something I love doing so I know where I’m with my revenue for the year!
You may not realize that Discover Bank isn’t just for credit cards that offer amazing earn cash back earnings or awesome balance transfers (although they DO offer those great perks!). In addition, they actually offer some pretty great checking accounts and banking options if you want to use personal accounts for freelance income.
They have both regular checking accounts and money market accounts which is great to earn a bit of interest on your money. They also offer cash back with all their products — without using credit cards and going into debt. Yep, you can use your Discover Bank debit card to earn $0.10 on every purchase you make.
That can really add up when you’re making purchases for your business, like flights, meals, books and office supplies. As small business owners we need all the extra cash back we can earn to re-invest into our businesses.
Their customer service is also outstanding and I’ve never had any issues with security. Their mobile app allows you to check your balance, make transfers and even deposit checks with one click.
They also have some of the best interest rates available with a money market account and you can get unlimited free checks while you have an account.
PayPal Premier (or Business) account
Another great option is to avoid checking accounts all together and just use a Premier or Business PayPal account. If you use a service like FreshBooks or QuickBooks, you can choose PayPal as one of your payment options for freelance clients and then use the funds in the account just as you would a regular bank account.
Upon request PayPal will issue a debit card that’s attached to your PayPal balance, and you may even qualify for a PayPal Smart Connect line of credit which can come in handy when you need to pay bills for your business.
The balance in your PayPal account also earns a small amount of interest similar to a Money Market business checking account would at a traditional bank. And the best part about using a PayPal account as a substitute bank for your freelance business is that it’s completely free.
You can also make deposits to your PayPal account if you receive checks from clients. Just take a picture of the check with PayPal’s mobile app on your Android or iPhone, and the funds will be deposited within 2-3 business days.
With your PayPal account you can print off profit and loss reports, earnings reports, pay bills, and transfer funds to other bank accounts. Basically anything you can do with a regular bank account, you can do with a PayPal business account — and more.
UPDATE: Ally Bank was originally listed as a great bank but after doing some research, and receiving comments from other freelancers, it’s no longer a recommended bank for freelancers.
They are however great if you’re using a checking account for your household funds or other personal needs. So if you’re simply looking to keep personal funds separate, they require no minimum balance, no ATM fees and no monthly maintenance fees.
Ally Bank offers customers interest-bearing on personal checking accounts. They also offer CDs, IRAs, and savings accounts. Plus, their customer service is fabulous! I’ve even met some of the team at the Financial Blogger’s Conference a few years back.
The best banks for business accounts (LLC)
If you’re on the path to leveing up your business and have filed for a DBA (Doing Business As) or other business license, along with the LLC paperwork, then these checking accounts are excellent options.
Before opening any one of these accounts, though, you must have your business EIN or tax ID handy. And if you have any questions about them, contact me and I’ll do my best to answer.
Capital One Spark Business
BY FAR the best checking account system for small business owners is Spark Business from Capital One. While this bank is a fairly new member to the Capital One set of products it’s downright awesome.
Not only do you get a checking and savings account, with your business name and tax ID number, you also get a business credit card and access to an entire library of financial resources. ALL for free!
Some other tools you get are invoicing capabilities, merchant services, cash flow projection charts and financial reports. You can also sign up for a Spark 401k retirement plan, which most freelancers never have access to.
All-in-all, you get amazing banking services and financial tools to keep your business organized, with the great name of Capital One backing you up, for absolutely no fees.
EverBank is an up-and-coming online bank (similar to Ally) and offers many different kinds of business bank accounts depending on your needs, but I’m only going to focus on these two main ones.
- Small Business Checking – This account is perfect for sole-proprietors (it’s not available to LLC or corporations) and comes with no monthly fee. Plus, you’ll earn a small interest for your daily checking account balance. You need $1,500 to open the account.
- Business Checking – This account is great if you’re an LLC with a higher monthly balance and want more features. The $14.95 monthly fee is waived if you keep a balance of more than $5,000 every month. Plus, the first 200 transactions are waived. You need $1,500 to open this account as well.
What if your business is not a sole-proprietor but an actually LLC or INC entity? Here are the best checking accounts for your LLC small business.
Chase Business checking
Chase offers 3 different tiers of business checking accounts depending on your needs.
- Chase Total Business Checking. This is the business account I currently use since I filed for a DBA and Tax ID number here in Texas. It comes with a $10 monthly account fee, which is waived if you keep a regular balance of $1,500 or more each month. It allows for international wire transfers, up to 200 transactions and $7,500 worth of deposits, for no additional fees.
- Chase Performance Business Checking. This is the next level up in checking accounts and offers the same features as the Total Business Checking except it allows you to have 350 transactions and up to $20,000 in deposits for no additional fee. The $20 monthly fee is waived if you keep a minimum balance of $50,000 or more.
- Chase Platinum Business Checking. This is the most robust option of all three, and is likely for large businesses and corporations. It has a $95 monthly account fee that’s waived if you keep a qualifying balance of $100,000 or more. It provides up to 500 transactions and $25,000 in deposits each month, with no additional fees.
Generally you have to find a local branch to open your business checking account, but that isn’t too difficult as they have quite a few branches all over the U.S. and the world. It’s how Starbucks is for coffee — there’s usually one on every corner.
The online site and mobile app make it extremely easy to keep track of your balance, income, and expenses. Like I said, there are ATMs everywhere, and pretty much all online software, invoicing programs, and bookkeeping software will link to Chase because it’s so popular.
Confused yet? There are lots of different factors that go into choosing the best checking account as a freelancer. You want to make sure it’s simple and easy to access your funds, especially if you’re a location independent freelancer who travels a lot (like I do).
Secondly, you don’t want to pay a lot of monthly account maintenance fees since your business is small and may not have large amounts of money coming and going.
What bank account do you use as a freelancer business owner? Leave a comment below sharing your experience.