A checking account is a type of bank account that allows people to deposit money and write checks to withdraw cash or make payments. Checking accounts are convenient because they allow users to access their money easily and make transactions without carrying around a lot of cash.
When it comes to checking accounts, most people think of personal and business checking accounts. Many people don’t realize that there are differences and end up with a bank account that doesn’t fit their needs. But what are the differences between the two? And which one is right for you? Here’s a breakdown of the pros and cons of each type of account so you can make an informed decision about which one is right for you.
Table of Contents
Personal Checking Accounts
The main difference between personal and business checking accounts is who can open the account. As the name suggests, personal checking accounts are for individuals.
Pros;
- No minimum balance requirements
With this checking account, you can keep your balance as low or high as you want. There are no minimum balance requirements, so you don’t have to worry about fees if your balance gets too low.
- More relaxed rules
These accounts have fewer rules and regulations than business checking accounts. This can be an advantage if you’re not sure you can meet the requirements of a business account.
- You can get a debit card linked to your account
A debit card allows you to access your funds 24/7. You can use it to make purchases or withdraw cash from ATMs.
Cons;
- Limited to six withdrawals per month
Federal law limits the number of withdrawals you can make from a personal checking account to six per month. This can be a disadvantage if you need to make more than six withdrawals in a month.
- Lower interest rates
The accounts tend to have lower interest rates than business checking accounts. This is a disadvantage if you’re looking to earn interest on your balance.
- It has fees associated with the account
Personal checking accounts have monthly fees, ATM fees, and other miscellaneous fees.
Monthly service fee
Most personal checking accounts have a monthly service fee. This fee can be waived if you meet certain requirements, such as maintaining a minimum balance or setting up a direct deposit.
ATM fees
If you use an ATM that’s not affiliated with your bank, you may be charged a fee. These fees can add up if you use an ATM frequently.
Other fees
Other miscellaneous fees that may be associated with a personal checking account, such as a fee for ordering checks.
Business Checking Accounts
Business checking accounts are designed for businesses of all sizes. From sole proprietorships to large corporations.
Pros;
- Higher interest rates
Business checking accounts tend to have higher interest rates than personal checking accounts. This can be an advantage if you’re looking to earn interest on your balance.
- No limit on withdrawals
There is no limit on the number of withdrawals you can make from this account. If you need to make more than six withdrawals in a month this is the advantage of the account.
- You can get a debit card linked to your account
A debit card allows you to access your funds 24/7. You can use it to make purchases or withdraw cash from ATMs.
- Multiple signers
A business checking account can have multiple signers, which means more than one person can have access to the account. This can be an advantage if you need to give other people access to your account. Therefore, business checking accounts are often used by businesses with multiple employees.
- Help to establish the business’s identity
This is achievable when a business account is opened in the company’s name. The company’s name and address will be printed on the checks. Also, the business account can help to establish credit for the business. Therefore, it becomes easy to identify the company when conducting transactions.
- Can write checks for business expenses
This helps to keep business expenses separate from personal expenses. It also makes it easier to track business expenses for tax purposes. Most banks achieve this by providing special checkbooks for business accounts.
Cons;
- Minimum balance requirements
Most of these checking accounts have minimum balance requirements. This can be a disadvantage if you don’t have enough money to meet the requirements.
- Limited to six withdrawals per month
Federal law limits the number of withdrawals you can make from this checking account to six per month. This can be a disadvantage if you need to make more than six withdrawals in a month.
- Higher fees
Business checking accounts tend to have higher fees than personal checking accounts. If you are not careful with your account, the fees can add up making it expensive to maintain.
Conclusion
Above are the differences between these checking accounts. It is important to note that there are advantages and disadvantages to both types of accounts. You will need to decide which account is right for you based on your needs and financial situation. Business checking accounts are bank accounts that are meant for businesses.
