When promoting business accounts, many banks offer a free banking period to new customers. Once this ends, normal transactions fees apply. Make sure you get the best long-term deal for your business.
Free banking period
Larger high street banks are keen to enter into a lifelong business banking relationship and most people don’t bother changing due to the perceived hassle this will cause. To entice you they offer a 3-25 month period of free banking. When this period ends you will revert to standard charges which can vary greatly between banks. When you sign up, make sure you are aware of both the standard monthly fee and the costs of individual transactions after the initial free period expires.
Interest rates vary from 0% to 10% AER for business bank accounts even though banks are lending out your deposits to other companies at high interest levels. It is worth visiting a comparative website to check AER rates before choosing the right bank account for your business.
Type of business
The type of business you run will affect how much you pay in charges. If, for example, you own a retail business with a high level of transactions, then your banking footprint will be greater than that of a freelancer.
What you will be charged for:
The following charges will be on top of your monthly or annual fee.
- Paper bank statements
- Processing cheques
- Debit card cash withdrawals
- Overdrafts and unauthorised borrowing
How to minimise business banking charges:
- Opt to go paperless and receive bank statements online or by email.
- Ask companies/customers to pay invoices by automated payments (BACS, Faster Payments, CHAPS) the fees are usually smaller than cheque processing fees.
- If paying persons/companies by cheque, then pay in a lump sum to cut down the processing fees.
- Keep debit card withdrawals to a minimum.
- Avoid using the authorised overdraft facility unless absolutely necessary and avoid unauthorised borrowing as the rates will be high.
- Transfer any surplus cash into a business deposit account rather than earning 0-10% AER in your business account.
Remember you can change
If you feel that your current bank is charging too much for its services, remember you can change your provider, it’s up to you. Use comparative websites to check for the best deals.