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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.

The following provides a summary of the various bank checking accounts and services available to small businesses by local Lawrence banks.

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.

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.

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.
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.

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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