The Startup Checklist

14Open Bank, Credit Card, and Merchant Accounts

You've probably been using banks for many years as an ordinary consumer. But choosing and using a bank in your role as the founder of a startup business presents a number of new challenges.

Working with Your Bank

The most basic type of bank account for your startup is a business checking account. In some ways, this is similar to a personal checking account, in that both have monthly fees that may be waived under certain circumstances, typically by meeting a minimum balance requirement. Both charge fees for specific services such as overdrafts. However, most business accounts limit the number of free transactions—­including checks, deposits, and withdrawals—that you can perform each month, and pay interest at lower rates than interest-bearing personal accounts—in many cases, they pay no interest at all.

Where a business checking account is used primarily to manage your funds and pay your vendors, a merchant account is used primarily to accept credit card payments from customers. Until recently, this was the only way for a business to take credit cards. However, the last few years have seen the emergence of specialized payment processing companies which can streamline the process for small businesses, especially those operating online. While there is still a role for bank-offered merchant accounts (particularly for companies with a high volume of credit card transactions), you will find that it makes more sense—at least initially—to ...