Business bank charges can be surprisingly expensive, especially if you’ve come to the end of an introductory free-banking period.
You may face a monthly account fee, charges for making cash deposits, international payments, overdrafts or transactions above your account’s allowance.
Individually, some of these charges are fairly small, but they can add up to a hefty sum over a year.
The good news is that business banking has become much more competitive over the past five years, so there is little reason to keep paying for an account that no longer suits the way you run your business.
Check what your bank is actually charging you for
Start by scanning your latest statement, or online account and find your current tariff.
Business banking providers can charge for things like:
- monthly account fees
- electronic payments above an included allowance
- cash deposits and withdrawals
- CHAPS and international transfers
- overdrafts and unpaid payments
- cheque handling
- paper statements or branch services.
Work out which charges you actually incur each month – as many won’t apply to your account.
You may find that a bank account with a £10 monthly fee may still be cheaper than a supposedly free account if the free account charges heavily for the transactions you use most.
Look at free business bank accounts
Many banks offer a period of free business banking to new customers, while some newer providers offer accounts with no monthly fee at all.
Here are a few leading banking providers we work with here at ByteStart.
- Tide – app-based business banking with a free account option and £50 cashback through ByteStart.
- Zempler Bank – business accounts aimed at sole traders and small companies, with free and paid plans.
- ANNA Money – app-based banking with invoicing, tax and administrative tools alongside its business accounts.
If you regularly handle cash, cheques or foreign payments, check those charges particularly carefully. Some app-based accounts suit businesses that receive most of their money electronically.
Make sure your account still suits your business
The account you opened when you started trading may not be the right one three or four years later.
You may now be making more payments, taking card payments instead of cash, receiving money from overseas or keeping much larger balances in the account.
Look at:
- how many payments are included each month
- cash deposit charges and limits
- ATM fees
- international payment charges
- overdraft rates and fees
- whether you are paying for extras you never use.
Do this once a year rather than assuming your current bank is still competitive.
Consider an app-based or online bank
If you rarely visit a branch, an app-based account may be a better fit.
They tend to suit sole traders paid by bank transfer or card who don’t handle much cash.
Before switching, check that the account still covers what you actually use, such as cash deposits, cheques, overseas payments, extra users, or accounting software links.
Keep an eye on your balance
Unexpected overdraft charges and rejected payments are much easier to avoid if you know what is going through the account.
You don’t necessarily need to inspect your bank account obsessively every morning, but it makes sense to check it regularly and more often when cash flow is tight.
Banking apps can also send alerts when your balance falls below a level you choose, which is an easy way to spot a problem before a payment is due.
Use scheduled payments where they help
Standing orders and scheduled bank transfers can help you avoid missing regular payments.
They are particularly useful for fixed bills that fall on the same date each month.
For larger or less predictable payments, make sure there’s enough money in the account before setting them to leave automatically.
Think about how much cash you handle
Cash can be an expensive way to get money into a business bank account. Banks and Post Office deposit services may charge a percentage of the amount paid in, a fixed fee, or both.
If customers can reasonably pay by bank transfer or card instead, reducing the cash you handle may cut banking costs and save time.
If you still take a lot of cash, compare cash deposit charges before choosing an account. A free monthly account fee is little use if you are then paying heavily every time you bank the week’s takings.
Don’t assume your bank will automatically give you its best deal
Existing customers do not always get the cheapest account or tariff.
If your banking costs have increased, ask what other business accounts or pricing plans your bank can offer. Then compare them with rival providers.
You are in a much stronger position if you know exactly what competing banks would charge for the same type of account.
Put spare cash to work
If your business regularly holds more cash than it needs for day-to-day bills, you could also open a business savings account.
Keep enough money available for tax, wages and other upcoming costs, but there is no particular benefit in leaving a large surplus sitting in a current account paying little or no interest.
Check access restrictions carefully before moving money into notice or fixed-term accounts.
Switch banks if you’re paying too much
You don’t have to stay with the same business bank indefinitely.
Many UK banks take part in the Current Account Switch Service (CASS), which can move eligible accounts from one provider to another.
Where CASS applies, the service transfers your balance, Direct Debits and standing orders and closes the old account. After the switch, payments made to the old account are redirected.
However, not every business account or provider is covered. Some accounts have to be moved manually, so check that both your old and new accounts are eligible before you start.
See our separate guide to switching business bank accounts as a sole trader.
Query charges you don’t recognise
If you don’t recognise a charge, ask the bank what it relates to.
If you believe the bank has made an error or treated you unfairly, use its formal complaints process. Depending on the type of business and complaint, you may also be able to take the case to the Financial Ombudsman Service.
Common ways small businesses waste money on banking
- Paying for an account that is more complicated than you need. Extra features are only useful if you actually use them.
- Ignoring small transaction charges. A few pence or pounds at a time can add up over 12 months.
- Using the wrong account for the way customers pay you. A business that takes a lot of cash has very different banking needs from a consultant who receives two or three bank transfers a month.
- Running too close to the overdraft limit. A small delay in a customer paying an invoice can then trigger charges or rejected payments.
- Staying with the same bank through habit. Business banking changes quickly, and an account that was competitive when you opened it may no longer be good value.
- Mixing personal and business transactions unnecessarily. Sole traders are not generally required to have a separate business bank account, although their bank’s terms may restrict business use of a personal account. Keeping business transactions separate usually makes bookkeeping and tax records much easier. A limited company is a separate legal entity, so keep its money separate from the directors’ personal finances.