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How To Manage Your Corporate Banking Fees
When it comes to fees, make a list of all possible fees — deposits, checks, monthly fees, cost for overdrafts, lost checks, photocopies of lost statements — and comparison-shop.
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Business New Haven
11/22/1999
By: Priscilla Searles
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Few people would go out and buy the first car they came across without doing some comparison-shopping. But many business people fail to do the same when it comes to choosing a bank.
There are a variety of options available, so the businessperson should know what he is looking for and go armed with questions that will permit an informed choice.
Is the bank you're looking at geared to serve large businesses, or is it targeting mid-sized and smaller firms? Even if you have been with a bank for some time, mergers and acquisitions have changed the focus of many banking institutions. One consideration is the mutual bank vs. a public stock institution: Mutual banks are owned by their depositors and cannot be bought or sold without consent of their trustees. And don't forget that picking a bank for your business requires different service than what is needed for a personal account.
What kind of customer are you in the eye of the banker? Are you a retailer making daily deposits and withdrawals? Most banks charge fees for deposits and withdrawals, but the range and types of fees can be diverse. If you are a mid-sized service business with few checks and deposits and can maintain a high balance in your checking account, some banks offer more generous earnings credits on your balance than on others.
For companies that move large amounts of money, a “sweep” account may be for you. Sweep accounts move your money at the end of each business day into an interest-bearing account overnight. Naturally, there is a charge for this service: You must balance that fee against the interest income you may earn.
Earnings credits, rather than paying you outright interest on the money in your checking account, requires some investigation. Some banks offer a credit against fees you would otherwise pay, but it requires that you keep a minimum standing balance in your account for fees to be waived. Ask the banker what standing balance is required and how generous is the bank's earnings credit.
Don't forget to ask how the earnings credit is calculated. Does the bank include a line on your monthly statement showing how much you have to maintain in deposits to waive all fees - and is there a fee to show this calculation on your statement?
Does the bank charge a fee for each deposit - or even a fee for each item deposited? For businesses which make few deposits, this fee is of less concern than the base monthly service charge. But if you are a retail business, check of the deposit charge. Some banks actually charge to deposit cash. Check out all special service charges at your bank. You may be paying more than you know to make deposits.
Again, when it comes to fees, make a list of all possible fees - deposits, checks, monthly fees, cost for overdrafts, lost checks, photocopies of lost statements - and comparison-shop. Often you get better service from small banks, which can make decisions locally on items such as overdrafts.
If you have just started a business, your ego is going to demand that your business name be on your checks. But fees for a business name on a check can cost $20 to $30 a month for business checking accounts. Business accounts cost more than personal accounts, so do your homework.
Some banks will permit you to circumvent this by opening a personal checking account with your business name on it, as long as your business is not incorporated or a partnership. A personal NOW account with no fees and even paying a little interest may be for you.
Know whether your business fits your bank's target market. Lastly, are you comfortable with your choice - will they give you the personal service you require?
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