Banking |
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As a business owner there are several important
decisions you need to make. One decision that may seem relatively
minor, but can have a significant impact on your available
cash, is where to bank. This decision is important because
you want to be assured that your sales dollars are being
kept properly. In addition, you want to have access to your
funds as easily as possible and avoid having a large amount
of your money going to service fees.
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- The following provides a summary of the various bank
checking accounts and services available to small businesses
by local Lawrence banks.
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- Account Types
- Low Volume Commercial Checking: Any business
entity may use this account. The general service fee
is a monthly charge of $5 to $15. This account is best
suited for a small business that does not have a lot
of monthly transactions, for example, under 30 transactions.
With this account, banks will process a limited amount
of checks, debits, withdrawals, or deposits for free.
For example, the first 15 to 25 transactions may be
processed without a fee, but the bank will then charge
a service fee of $.10 to $.40 for any additional transactions.
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- Commercial Interest-Bearing
Checking: Corporations and partnerships are prohibited
from using this account because the government will
not allow these entities to earn interest on their checking
accounts. This account is best suited for sole proprietorships
that have a relatively high average balance and a low
volume of transactions (around 60 or less per month).
Monthly fees of around $5 and service charges between
$.10 and $.40 per transaction are incurred.
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- Commercial Checking: Any business entity may
use this account. The monthly fee is $4 to $10 and average
transaction fees are charged. The rates charged for
deposits vary: this fee traditionally runs from $.05
to $.20 depending upon whether the check received by
the merchant is drawn from a local bank or not. Usually,
if the bank the check is written on is from the same
bank where the merchant does his or her business, a
deposit fee is not charged.
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- A benefit of this account is the ability to receive
an earnings credit, which is based on the monthly average
balance and transactions of an account. The average
balance is multiplied by the bank's earnings credit
rate and then applied to the service charges for the
month. For example, if a customer has an average monthly
balance of $5,000 and the earnings credit rate is 5%,
then the business would receive a credit towards its
monthly fees of $250. However, the customer will not
receive any earnings in cash. If the credit amount exceeds
that of the actual service charges, the excess is waived.
The earnings credit rate received by businesses varies
from bank to bank, so ask about it when choosing your
banker.
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- Other Factors to Consider: Banks also vary
on the amount required to open an account or may require
average monthly balances. Be sure to ask about these
requirements, because failure to maintain them may result
in unwanted service charges.
- Take into consideration bank branch locations, available
business hours, and the quality of customer service.
Sometimes these factors may outweigh a slight additional
cost. Because banks typically don't charge a deposit
fee for their own checks written by a customer, a business
owner may want to consider where the customers of the
business typically bank. Ask which accounts have an
earnings credit; some banks offer this benefit on all
commercial accounts.
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