The management of your organizations money is a critical part of what you do. What do you need to look for in a bank account for your nonprofit organization? Once you have incorporated your non-profit organization as a separate legal entity with its own name and employer identification number (EIN), you can open up a bank account for the organization. You do not have to wait until you get a tax-exemption from the IRS.
Keep in mind that not all banks and not all bank accounts are created equal. Taking the time to comparison shop is to your advantage now because of what it could cost you down the road. I would encourage you not to automatically choose the bank that you use for your personal account.
Find out if the bank has options just for nonprofit organizations or small businesses.
This type of account might have a lower minimum deposit and lower monthly fees or transaction costs than a regular business account at the bank. Do not assume that the nonprofit account is automatically your best option, however. The account might work for many nonprofits but have restrictions, lack services, or have high fees for specific transaction that just don’t work for your situation.
Questions to ask while researching which bank to use for your nonprofit:
- What is the minimum required deposit?
- What is the minimum balance?
- What happens if the account drops below that amount? (For instance, some “free” bank accounts require a high minimum balance, or sock you with high fees.)
- Is there a monthly account fee? What is it, and what does it cover?
- Is there a monthly account fee? What is it, and what does it cover?
- Is there a check-writing fee? (Some banks let you write a certain number of checks per month without costs, while others charge per check. If you won’t be doing a lot of financial transactions, a higher check-writing fee might be a good trade-off for a lower monthly fee, but if you will be paying a lot of people every month, the check fee becomes important.)
- What is the procedure for getting check signing rights? Your nonprofit might want several people to be able to sign off on checks (for instance, the executive director, the board president, and the board treasurer).
- Is the bank convenient for you? If you like doing things in person, is the bank near you? If you need ATMS, does your bank offer free ones near you? If you like the convenience of the internet, does the bank have a solid online presence?
- If you need, or might need, other services (like a savings account or small-business loan), does the bank offer a competitive interest rate?
When looking for a bank for your nonprofit organization, don’t just go for the obvious choices.
Look at online banks. Because they have less overhead, online banks often charge lower fees and provide better interest rates. See if your nonprofit organization would be eligible for a credit union account. Because the account holders are the owners (instead of shareholders, as is the case with regular banks), credit unions tend to charge less and give out more interest.
