Decoding Business Checking

In the years I have worked in Treasury Management, I’ve seen business customers continually frustrated when trying to understand their business checking accounts. You think it should be simple and easy to understand, only to find limits and minimums to consider. When you feel you have it figured out, it changes. When your business grows, you may need to move into a more robust checking account that fits the needs of your growth. With that growth comes new limits or monthly fees you have never seen or understood. I have spent hundreds of hours with customers either explaining these accounts or analyzing them.

Let me share what I have learned, and if you’re frustrated, remember,?First Federal Bank?can help:

Though they have many names and features, there are only two types of business checking accounts. The first is a non-analyzed checking account. A non-analyzed account typically works well for businesses with low transaction volumes. Financial institutions determine the transaction limits for their specific accounts and if you go over those limits, there is a fee.

Most of these accounts have a fee associated with them if you do not meet the account’s specifications (over transaction limit, under minimum balance, over cash deposits limit, etc.). For example, a non-analyzed account might require 200 credits/debits per month and $0.30 for each additional item. If this sounds like your business checking account, you are in a non-analyzed account.

The second type of business checking account is an analyzed account. Depending on the financial institution, analyzed accounts may be called different things such as, commercial analyzed to corporate analyzed checking, but regardless of the name, they function similarly. This account type can be challenging to understand as there are multiple fees and an earnings credit associated with account activity.

Let’s first start with the fees. In an analyzed account, everything has a cost associated with it. There is a fee for every type of credit, debit, or check processed. Look at your analysis statement to see what you are being charged. (You should receive the additional monthly statement as the analysis statement differs from your monthly statement.) If you are not receiving this statement, call your financial institution and ask for your analysis statement.

Now comes the earnings credit. The earnings credit is a daily calculation the financial institution pays the account holder based on the deposits in the account. At the end of the month, if the earnings credit of the daily deposits is more than the accumulated fees, then the account is not accessed the fees. If the earnings credit is less than accrued fees, the account is charged the fees. Ultimately, an analyzed account has a fee for any transaction, with an earnings credit based on the daily deposits to offset or pay down the monthly fees. So if your account activity varies a lot each month, you will have to pay close attention to determine whether or not you’ll be paying a fee that month.

I would love the opportunity answer your specific questions. To set up a free account review, please?call?or?email, and I’ll help take the mystery out of business checking while making sure your money is working for your business.

-- Christopher A. Reid, Director of Treasury Management