FREE Business Checking and How to Free Up $2,000!
Image sourced by Floriane Vita @flo_
Until recently, our business banked with Wells Fargo.
We call banks like Wells Fargo, Bank of America, Citibank, JP Morgan Chase Bank and their cousins a Brick and Mortar Bank because they maintain bank branches – buildings, furniture and fixtures, ATM machines, desktop computers, bank tellers and other staff members.
Wells Fargo and many other Brick and Mortar Banks typically charge monthly checking account fees of $15.
That’s $180 per year – $15 per month multiplied by 12 months per year. . .
That is, unless you maintain a minimum daily balance of $1,500 or $2,000, depending on the bank and your account type and whether you qualify for relief in another way.
Remember, I used to work at Citibank and JP Morgan Chase for 14 years back in the day. So. . .
I can’t really blame the banks for requiring accountholders to maintain a minimum balance or pay monthly account fees. Guess they have to make money somehow.
You see, banks use accountholders’ deposits (money) to earn money. The banks lend that money to customers (borrowers). To close the loop, the borrowers pay interest and fees.
To avoid the monthly checking account fee, Wells Fargo and many of their cousins require a $1,500 to $2,000 minimum daily balance.
Currently, Chase Bank’s minimum daily balance required to avoid monthly checking account fees is $2,000 too. But. . .
Sometimes there are some ways you can get around the minimum.
And if you miss – if your balance drops below the required minimum balance, even for One Day, the bank Zaps you $15. Ouch. Recently, that happened to us by accident.
Or as we talked about in the blog post “How to Avoid Airline Checked Bag Fees – Part 1” – click here. Good work if you can get it.
In addition, there are other banks, for example smaller regional banks and community banks, that require lower minimum daily balances.
Credit Unions. While you’re at it, you might want to look into credit unions. They run their financial institution for the benefit of the accountholders – the members. Credit union fees and charges tend to be lower than other commercial banks and financial institutions.
In contrast, online banks – also called virtual banks – don’t maintain bank branches. Or they might maintain one or two bank branches to meet Federal banking regulatory requirements.
Online banks have a back office or two and back office personnel, some furniture and fixtures and computers but NO bank tellers and again, few if any bank branches.
What’s more, online banks and virtual banks’ back office doesn’t need to be on Main Street in a densely populated area where rents can be high.
In other words, online banks’ operating costs are much lower than Brick and Mortar Banks’.
In exchange, online banks and virtual banks typically share the savings with you in the form of higher interest rates on savings accounts and checking accounts – approximately 0.9% to 1.0% higher than the Brick and Mortar Banks.
0.9% equals 90 basis points. And. . .
1.0% equals 100 basis points.
One basis point equals 1/100th of 1.0%.
Or let’s put it another way, 1.0% equals 100 basis points.
“Basis Points” is the language of the fixed income markets – for example mortgages, bonds, notes and loans.
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To Save Bank, let’s take a look at American Express® Business Checking
American Express® National Bank is a unit of the American Express Corporation, often referred to as ‘Amex®’.
American Express® National Bank is FDIC-insured.
FDIC means Federal Deposit Insurance Corporation; which is a US Government Agency that insures deposits, currently up to $250,000.
Of course there are rules regarding FDIC insurance so be sure to gain an understanding of how it works and handle your bank accounts and money accordingly.
As this blog post goes live, Amex® has No Minimum Balance Requirement on their business checking account or for that matter on their personal checking accounts.
In addition, Amex® Doesn’t charge fees for transfers by ACH.
You can transfer money to and from your business checking account (and personal checking account) easily.
Interest Income
What’s more, currently American Express® Business Checking pays you 1.30% interest income on your average daily balance.
Nice! Not bad for opening a new checking account.
While 1.3% is an attractive interest rate, periodically banks change their interest rates and terms. So. . .
Be on the lookout for changes in interest rates (and fees). Bank management changes interest rates, fees and terms and conditions based on the business climate, the economy and market interest rates to name a few reasons.
We opened the account and deposited $5,000. When the 60 days passed, we earned $10.83.
That’s $5,000 multiplied by 1.30% which equals $65 per year; divided by 12 months per year multiplied by two months, which equals $10.83.
If we leave the $5,000 on deposit for an entire year and Amex® pays 1.3% interest rate, we’ll earn $65.
The Budget and Grow Rich® Way!
While $65 may seem like a small amount of money, consider these key points:
To earn the $65, all we had to do was open the account, deposit the money and sit and wait. Money while you sleep. And. . .
Assuming things stay the same, we will earn $65 in interest income every year.
And remember, with the business checking account at Wells Fargo, we had to leave $2,000 on deposit to avoid the $15 monthly fee, or $180 per year.
We will save the $180 in checking account fees Every Year.
In addition, when we closed the Wells Fargo checking account, we freed up the $2,000.
And after we complete our cash projections, we’ll withdraw a decent portion of the $5,000.
Net net, that’s a win.
And keeping with the Budget and Grow Rich® theme, saving pennies adds up to big dollars and then $10, $100, $1000’s and on and on.
Cash Withdrawals
You might ask how you can withdraw cash from an ATM.
That’s a very good question since American Express Bank doesn’t maintain any Brick and Mortar Bank Branches.
With American Express® Business Checking, you can withdraw your money in cash at ATMs operated by AllPoint Network® and MoneyPass®.
AllPoint runs approximately 55,000 ATMs across the USA. In my area (outside New York City), their ATMs are located in CVS and Walgreen’s stores; and Circle K, Speedway® and Sunoco gas stations.
MoneyPass runs over 40,000 ATMs located at financial institutions and retailers across the USA and Puerto Rico.
AllPoint and MoneyPass may charge you a cash withdrawal fee when you withdraw cash using your Amex® Business Checking debit card.
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Good Housekeeping and Tax Compliance
As a general rule, we Don’t withdraw cash from our business checking account.
We transfer money to our personal checking account or yes, write a check.
This creates a “paper trail” so we have a good set of books and records and have supporting detail for the transactions. We believe that this provides better controls and sound financial management.
In our experience, this demonstrates a good faith effort to comply with the spirit of the IRS rules.
But different business owners have different views.
If we incur cash expenses, we use our own cash and submit an expense report to the company for reimbursement. Our company doesn’t have a petty cash box.
Deposits into American Express Business Checking
Since American Express Bank doesn’t maintain any brick and mortar bank branches, should you receive any checks, you’ll have to download the American Express App on your Smartphone. . .
We hadn’t used mobile banking until we opened the American Express Business Checking Account but it’s straightforward.
It’s probably about time we left the dark ages. . .
American Express® Debit Card
American Express® issues a debit card which gives you American Express® Membership Rewards® Points on your eligible spending.
Currently, Amex® gives you one (1) point for every two (2) dollars you spend on eligible debit card purchases.
You can redeem your American Express® Membership Rewards® Points for cash. They deposit the money into your bank account.
If you have an American Express® Platinum Card, you can convert your Amex Rewards Points into frequent flyer airline miles, for example Delta; or hotel loyalty points, for example Hilton.
We’re not a fan of using a debit card for purchases. We feel that a credit card adds one level of separation between vendors and merchants and our checking account.
New Account Bonus
When we opened our business checking account with American Express, Amex® was offering a bonus of 30,000 Amex® Membership Rewards Points if we maintained a minimum account balance of at least $5,000 And we made five (5) deposits, withdrawals or transfers (inbound transfers or outbound transfers).
Accountholders could convert the points into frequent flyer miles or hotel loyalty points, IF they were also an American Express® Platinum Credit Cardholder. Unfortunately, we are not.
But since we didn’t have a Platinum Card, we received cash – $240.
For every 1,000 American Express Membership Rewards Points, you get $8.
So, 30,000 points multiplied by 8%, that’s $240.
Not bad actually and pretty much a market new account bonus.
However, we would have preferred the Delta frequent flyer miles. Can’t win ‘em all. .We wrote to the American Express® CEO; let’s see what he says. . .
Locking In The New Account Bonus and Next Steps
We made the five transfers and after 40 days after opening the account, we called Amex® to confirm. We would hate to miss the deadline and fail to get the new account bonus.
And after the 60 days passed, we called Amex® to confirm that we met their requirements to receive the 30,000 rewards points.
Success. We’re requested the conversion into the $240 cash.
We’re in the process of closing the Wells Fargo business checking account which will free up the $2,000 we left on deposit to meet Wells Fargo’s minimum balance requirement. But we have to make an appointment with a banker and visit the branch. That will consume 45 minutes to one hour. Ugh!
We’re also running a cash projection to determine the amount of money – minimum balance – we should keep on deposit in our American Express® Business Checking account.
We’ll withdraw the $2,000 when we close the Wells Fargo checking account. And we’ll put the money to good use.
And since our business has enough cash flow, we plan to withdraw the bulk of the $5,000 too.
Paper Checks
Printed checks?
Humor me on this, please.
Order a book of checks (paper checks), if you need them.
We find that we still write a few checks every month. Last month, we wrote one check and the month before we happened to write three checks.
Automating the rest of the payments is on my To Do List. But the remaining payments are sporadic and I’m not sure that those vendors accept electronic payments.
American Express® doesn’t offer paper checks directly.
But you can order a book of checks through Amex® which is really offered by Harland Clarke®.
You can also order checks from Wal-mart Checks and Costco Check Services (which is really offered by Harland Clarke® too). For the Costco® checks, it looks like you have to be a Costco Wholesale member.
To order paper checks, you’ll need your bank’s 9-digit ABA Routing Number and your checking account number.
If you do use paper checks and the payee (recipient) uses mobile banking, tell the payee to Shred your check after they deposit it.
You Don’t want your checks or your signature floating around. These days, unfortunately thieves are stealing checks and altering the payee and the amount right and left.
The Industry calls this “Check Washing.” Terrible!
Be sure to protect yourself!
How to Open an American Express® Business Checking Account
Opening the new checking account, initiating the transfers, ordering new checks and closing the Wells Fargo business checking account probably took two to three hours all in. Somewhat irritating to us actually. But. . .
Over time, we think it’s well worth it, especially that we can avoid the monthly checking account fees and put the $2,000 to work more efficiently.
Ah the price of the money. . . But. . .
Seems like a no brainer to us!
But you decide. You be the judge.
Check out Amex Bank Business Checking.
Be sure to do your own research and determine whether an online checking account is right for you and whether you’re comfortable with American Express® National Bank.
Learn more about American Express Business Checking:
Amex® new accounts information line: 1-888-556-2436
Amex® business checking account customer service: 1-855-497-1040
To learn more about American Express® Business Checking or to open a checking account click here.
We have been an Amex® customer for over 20 years as we launch this blog post and we’re comfortable with American Express® National Bank.
BUT be sure to research banks and conduct your own due diligence!!! And make the best decision for you.
And remember that periodically, companies change their rules and terms and conditions change. So be sure to check the fine print. Look before you leap.
NO guarantees from Budget and Grow Rich®.
To find more banks that offer business checking accounts and interest-bearing checking accounts, visit Bankrate.com.
See you at the bank [figuratively speaking]
See you next week.
Arthur VanDam, CPA MBA
Build More Wealth Right Now Clickhere.
Budget and Grow Rich® – ISSN: 2992-9296 – USA International Standard Serial Number (ISSN)
Disclaimer: OH and Please Remember, we are Not financial advisors, financial planners, attorneys or accountants and are Not providing any specific financial, tax, accounting or legal advice here. Be sure to conduct your own due diligence and consult your own professional advisors to get sound professional advice that’s specific to your financial and personal circumstances, risk tolerance, time horizon and investment goals and objectives among other key factors! In addition, note that companies change their offers and terms and conditions periodically so the savings presented in this article / blog post may be outdated when you are reading it.
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