Seven pitfalls of choosing a business current account – and how to avoid them
With so many things to manage it can be easy to forget to consider whether your business bank account is still right for you. We take a look at some of the mistakes businesses make that mean they miss out on potentially better business current account deals, and give them the facts.
Anne Pieckielon, Director of Product and Strategy at Bacs
1. Automatically opening a business account with your existing bank
It can be easy to just automatically open your business account at the same place you use for your personal banking. But it’s well worth shopping around to make sure you not only get the best deal, but also get the account that’s right for you. If that’s at your existing bank then great - but it’s best to hunt down the right current account, wherever it might be.
2. Thinking that switching accounts is too much of a risk
Want to move business bank accounts but worried about the switch going wrong? Don’t be. The Current Account Switch Service came into effect in 2013 and means that switching to another bank or building society is simple, quick and stress-free. All you need to do is choose a switch date to suit you, and your new bank will take care of everything else – including transferring your Direct Debits, Standing Orders and any other ingoing and outgoing payments (such as supplier and salary payments). It’s also backed by a Guarantee, meaning you’ll never be out of pocket in the rare case that anything goes wrong. 50,000 businesses have already used the service, which is available at over 40 banks and building societies, so you’d be in good company too.
3. Only looking at the interest rate
When you’re choosing a bank account, it’s tempting just to go for the account with the biggest interest percentage. But if you forget about the account charges, all of the extra money you earn in interest could be negated. Remember, the best accounts offer low charges, as well as good interest rates. So weigh up the whole picture before you commit because of one particular benefit.
4. Being enticed by an introductory offer
Introductory offers are great – they can give you a useful overdraft, freedom from account fees, preferential rates and much more. But watch out for the small print. How long does the offer last? And what happens to your account once the offer’s up? If you don’t know the answers, you could be left with fees you weren’t anticipating – and costs that you can’t afford.
5. Forgetting about standing charges and other account fees
Some, but not all, banks charge a monthly or annual fee for holding a business banking account. These often come into effect once the introductory offer period is over. There could even be charges for online banking access. And don’t forget about the transaction fees either. Some banks charge fees for paying in cash and cheques, others charge for a certain number of transactions. You can be clever about the account you select by looking at what your bank charges for and what it doesn’t – and matching that to your business activity. Whatever your account offers, these are important costs to factor into your overall business budget.
6. Not taking advantage of added extras
For the forgetful amongst us, it’s worth taking advantage of some of your account’s thoughtful little perks. For example, some banks will set up alerts to remind you when your account balance falls below a certain amount or if a payment is due. It’s worth setting these up immediately so you can stay on top of your account activity. Don’t think your account has any added extras that suit you? Chances are there will be one out there that does, so don’t be afraid to look around.
7. Thinking of your business current account as different to your other services
It isn’t. Nor is it any different to your ISA, mortgage or even insurance. Your business continues to change and evolve, so why shouldn’t your business current account? You shop around for the best deals on plenty of other services, so as your business moves on, isn’t it worth assessing the requirements for its current account too?
The process is easy with the Current Account Switch Service. Once you’ve found the right account for your business, the whole process will be handled by your new bank or building society, so you can relax.
For more information on switching your business current account, www.simplerworld.co.uk.