- Nonprofits require bank accounts for donations, payments, and financial services, despite their tax-exempt status.
- Benefits of nonprofit bank accounts: protection, financial services, donation handling, interest, and loan facilitation.
- Choosing a nonprofit bank account: consider specialization, fees, services, rates, customer support, integrations, and alignment with values.
- Open a nonprofit checking account by gathering documents, assessing needs, comparing banks, and completing the application.
- Documents needed: personal ID, SSNs of authorized individuals, EIN, formation papers, and officer documentation.
If you’re running a nonprofit organization, you need to open a bank account for it. Choosing the right bank is important, so you want to make sure that you find the best bank accounts for nonprofits. There are many factors that you should consider, including interest rates and fees, so we’ll break down what you need to know to choose the right account.
Benefits of Opening a Bank Account for Nonprofits
Nonprofits are special organizations that are exempt from taxes. However, that doesn’t mean they don’t interact with money on a regular basis. Nonprofits need to accept donations and be able to pay for goods and services to support their mission.
That means that a nonprofit needs a good bank account that lets it keep its money safe and offers essential financial services.
Some of the benefits of opening a bank account for a nonprofit include:
- Protecting money. Bank accounts are a safe place to store cash and come with insurance from the FDIC. Money in a bank account for nonprofit organizations is insured even if the bank closes.
- Financial. Having a bank account means you get access to financial services from that bank. For example, the bank may offer bill payment services or payroll services so you can pay your employees.
- Accept donations. With a bank account for your nonprofit, you have an easy way to accept donations such as cash or check payments.
- Earn interest. If you open a nonprofit savings account, you can store your extra money and let it grow through interest payments.
- Access to loans. Your nonprofit may want to borrow money to finance a purchase, such as real estate or a vehicle. Opening a bank account can make it easier to get that loan, especially if you work with the same bank for your account and the loan.
Best Bank for Nonprofits 2023
The best bank account for nonprofit organizations will offer useful services at a low cost. One important consideration is whether the bank you choose is used to working with nonprofits. Nonprofits operate slightly differently from other entities and have different tax treatments. If you work with a smaller institution that hasn’t dealt with nonprofits before, it might be a bit complicated.
Some of the best checking accounts for nonprofits are:
|1,800 free transactions per year, $30,000 in free cash deposits or 300 cash transactions (whichever comes first) per year, Card payment processing available, Cash management tools, Check fraud protection
|200 free transactions per month, Overdraft protection
|$5 ($0 with a $,2500 monthly balance)
|25 free transactions per month, Dedicated relationship manager, Merchant services, Payroll services
|Ability to earn an APY, Excellent integration with nonprofit financial management software, Unlimited transactions and no fees, No overdraft fees
|Monthly fee can be waived fairly easily, 150 free transactions per month, Accounts specifically designed for nonprofits
|Manage debit, deposit, and ATM card settings for individual employees, Deposit checks, view account balances, pay bills, and make transfers through the mobile app, Integrates with QuickBooks and other leading accounting software, Free debit card, mailed within 10 business days of application approval, Other products include business savings, CDs, lending products, credit cards, merchant services, and collection services
When To Use a Local Bank or Credit Union
When exploring banking options for a nonprofit, major national banks like U.S. Bank and PNC Bank often appear as convenient choices due to their established online presence. However, the potential of local banks should not be overlooked. Despite their smaller size, numerous local banks offer a range of robust products that can compete with national counterparts.
Operating a church involves being a community cornerstone, and choosing a local banking institution exemplifies this commitment. Besides bolstering local business, you will also enjoy additional benefits such as:
Competitive Rates: Local banks frequently offer lower rates and waived fees to effectively compete with larger institutions. Inquire about the costs to open and maintain a checking account at your local bank – it might prove to be more cost-effective compared to national banks!
Local Insight: Being in the same vicinity, local banks have a keen understanding of your specific needs. They are attuned to the happenings in your community and the role your church plays in enhancing local lives. If your church seeks a loan for community initiatives, local banks, recognizing your contributions, may eagerly facilitate the process.
Personalized Service: One significant advantage of local banking is the personal relationship with your banking officer. They might even be part of your congregation! This personal connection encourages your banking officer to suggest beneficial banking products and share valuable money-saving advice.
Community Enhancement: Your church and local bank share a common goal: fostering a robust community. Collaborative efforts, from posting positive reviews on each other's Google Business profiles to jointly organizing charity events, contribute to building a stronger community. This connection not only enhances your church's reputation but also underscores the bank’s commitment to community development.
How to Choose a Nonprofit Bank Account?
When choosing the right bank for your nonprofit, you should think about whether the bank offers specialized nonprofit accounts or just normal business bank accounts. If there are specific nonprofit accounts, that bank may have more experience when it comes to working with nonprofits, which can be a benefit.
Other things to look for include:
- Fees. Consider the monthly fee (and what it takes to avoid the fee) and the fees for other common services, such as cash deposits, then estimate how much you’ll pay to use the account each month. Ideally, you want to find an account that won’t charge any fees. If you do have to work with a bank that charges fees, make sure the services you receive in exchange are worth what you’re paying.
- Services. Each bank offers different features and services and that should guide your choice. Online banks can have lots of perks but make it hard to deposit cash. If your nonprofit uses cash frequently, that can be an issue. Try to find a bank that offers services that will bring the most benefit to your organization.
- Rate of return. Some non profit bank accounts pay interest on your balance. Any interest you earn is like free money, so look for accounts with higher rates.
- Customer service. The last thing you want from a bank is poor customer service which makes it difficult to complete basic transactions or ask for help. Consider the bank’s reputation for service and how easy it is to contact someone for assistance.
- Digital banking tools. Many nonprofit organizations use tools like QuickBooks or other third-party services. Some banks integrate with these tools, so if you can find one that works with the apps you use, that can make managing your money easier.
- Values. Your nonprofit is probably working toward a certain goal, such as reducing climate change or supporting a specific community. You might want to find a bank that aligns with your nonprofit’s goals and values.
- Nonprofit financial institutions. If you are involved with a local nonprofit organization, exploring neighborhood not-for-profit financial institutions like credit unions can be a strategic move. These local financial entities are often ideally suited to handle the unique banking needs of community-focused nonprofits.
- Examine its Transaction Fees. Transaction fees might appear minimal initially, but they accumulate over time. Many banks fortunately provide checking accounts with no fees as a perk. Nonetheless, it's crucial to thoroughly review the offer as some banks limit the number of transactions that are free of charge annually.
- Ask about additional services. A business checking account is paramount, but it’s not the sole necessity from a bank. Inquire about other supplementary services such as loans, new business accounts, donation processing, or treasury assistance to enhance your banking experience.
Best Bank Accounts for Nonprofits
Our selection of the top bank accounts for nonprofits are:
Best Overall Bank for Nonprofits: U.S. Bank Nonprofit Business Checking U.S. Bank Nonprofit Business Checking is the best overall bank for nonprofits because its low-cost banking solutions help with optimizing financial resources. Also, its exceptional online and customer services assist with ensuring smooth and efficient financial management for nonprofit organizations.
Best for Small Nonprofits: Citizens Bank Clearly Better Business Checking Citizens Bank Clearly Better Business Checking is the best bank for small nonprofits because its no monthly maintenance fee helps with reducing operational costs. Also, its seamless online banking services help with efficient and effective financial management, allowing small nonprofits to channel more funds and focus towards their mission.
Best for Nonprofits that need Online Banking: Axos Non-Profit Money Market Axos Non-Profit Money Market stands out as the best for nonprofits requiring robust online banking because its comprehensive online banking services help with streamlining financial transactions and operations. Furthermore, its competitive interest rates aid in maximizing the funds available for nonprofits to allocate towards their impactful work.
Best Region Bank for Nonprofits: PNC Bank Non-Profit Checking PNC Bank Non-Profit Checking reigns as the best regional bank for nonprofits because its customized banking solutions effectively address the unique financial challenges faced by nonprofit organizations. Additionally, its extensive regional branch network enhances accessibility and convenience, ensuring nonprofits in the region have consistent and reliable banking support.
Best Brick and Mortar Bank for Nonprofits: Wells Fargo Initiate Business Checking Account Wells Fargo Initiate Business Checking Account is the top choice as the best brick-and-mortar bank for nonprofits because its widespread physical presence aids in providing personalized and accessible service, solving the problem of remote or impersonal banking experiences. Moreover, its diverse banking services and solutions directly target and alleviate the financial complexities that nonprofit organizations often encounter.
Best Socially Conscious Bank for Nonprofits: Amalgamated Bank Small Business Checking Amalgamated Bank Small Business Checking is the top socially conscious bank for nonprofits because its strong commitment to social responsibility aligns with nonprofits' values, addressing the need for ethical financial management. Moreover, its customized banking services simplify financial tasks, aiding effortless financial navigation for nonprofits.
Best Checking for a High APY for Nonprofits: LendingClub Tailored Checking LendingClub Tailored Checking is the best for nonprofits seeking a high APY because its competitive interest rates significantly boost the growth of nonprofit funds, addressing the challenge of fund accumulation for organizational projects. Additionally, its easy-to-use online platform aids in efficient financial management, helping nonprofits to focus more on their missions rather than financial handling.
How to Open a Checking Account for Nonprofits?
Opening a checking account for a nonprofit isn’t complicated. Just follow these steps.
- Gather the needed documents. To open a bank account, you’ll need to have documents like your ID and formation information for your nonprofit. Get it together first so you don’t have to deal with finding the documents later on.
- Think about your nonprofit’s needs. Consider your nonprofit and what it needs from a bank account. Use that information to guide your search.
- Compare banks and choose the best option. Look at multiple banks and think about how each will benefit your organization. Choose the one with the best account for your needs.
- Apply. Sit down and fill out the account application. This usually only takes a few minutes. Once you’re done, you’ll have a new account for your nonprofit.
Make Sure Your Nonprofit is Correctly Declared in Your State
A crucial step before opening a bank account is to ensure compliance with your state's regulations by properly declaring your organization's status.
For instance, as a nonprofit corporation, filing your articles of incorporation is essential. Even if not, your state may require particular documentation before allowing you to move forward.
Don’t hesitate to directly reach out to relevant authorities or explore their website to obtain accurate information. Ensuring all requirements are met beforehand is always a prudent approach.
Acquire Your Nonprofit Status and EIN
If not already completed, visit the IRS website and search for "Form 1023" to apply for official tax-exempt status.
Within the same website, proceed to apply for an Employer Identification Number (EIN), a necessary component for opening an account.
For additional guidance, the IRS website provides extensive tutorials, FAQs, and other resources to assist in understanding the necessary steps and requirements.
What Do You Need to Open a Nonprofit Bank Account?
To open a nonprofit bank account, you’ll need to provide the following information:
- Personal identification for anyone authorized to make transactions
- Social Security numbers for anyone authorized to make transactions
- Your Employer Identification Number
- Company formation documents
- Documents showing the officers of the non-profit
Other Banking Options for Nonprofits
Opt for a community bank or credit union: Such financial entities generally provide business banking and lending services, aligning more with your organization's mission compared to national or for-profit banks. For instance, credit unions, being not-for-profit themselves, often mirror your organization's structure and goals.
Choose Community Development Financial Institutions (CDFI): These banking institutions hold a significant community focus, dedicated to serving individuals often overlooked by mainstream banks, reinforcing your community-centered mission.
Consider regional banks like Fifth Third Bank and M&T Bank: A select few regional banks, including these, either present special account options or eliminate fees on their standard business bank accounts for nonprofit organizations, potentially reducing your operational costs and enhancing financial efficiency.
- Small Business Checking Account: Small Business Checking Accounts with traditional and online banks often suit most nonprofits well. These institutions usually have low fees and offer necessary support for any issues.
The accounts also offer the flexibility to link with other account types and may integrate with online bookkeeping tools. Nonprofits can establish various checking accounts to manage funds for different programs or events efficiently
- Money Market Account: Money Market Accounts offer enhanced transaction capabilities and easy access to funds. With competitive APY rates, they ensure your organization can access money whenever required.
These accounts typically mandate minimum balances between $100 to $10,000. Ensured by the FDIC, Money Markets maintain the same level of security and safety as traditional checking accounts, guaranteeing the safeguarding of your organization's funds.
Line of Credit: When selecting a bank for your checking or Money Market account, consider exploring available loans and credit lines. Starting an account establishes a relationship, aiding nonprofits in securing essential funding through credit lines. Banks may offer revolving credit lines, permitting access to further funds once previous loans are repaid.
Certificate of Deposit (CDs): Like Money Markets, Certificates of Deposit (CDs) offer nonprofits higher APY rates, with the distinction of limited access to funds until CD maturity. CDs, ranging from 28 days to over 10 years, aim to augment savings and interest earnings, with longer maturity yielding higher returns.
An additional advantage is the absence of monthly maintenance fees. For organizations seeking a secure method to hold surplus funds, CDs emerge as an outstanding option.
Key Factors When Opening a Nonprofit Bank Account Online
Choosing the best bank for your nonprofit involves seeing it as a partner rather than just a fund depository. Below are considerations ensuring your nonprofit aligns with the right banking ally:
- Interest Rates: Opt for banks offering competitive interest rates. Every earned penny further supports your nonprofit's mission.
- Reputation: Choose a bank known for reliable services and a solid reputation among nonprofits. Validate through client testimonials or recommendations from other nonprofits.
- Additional Value: Banks offering workshops, seminars, or financial courses demonstrate commitment to nonprofit empowerment, aiding in making informed financial decisions.
- Ease of Opening an Account: A straightforward account-opening process, preferably online, saves time and resources for your busy nonprofit organization.
- Nonprofit-Specialized Services: Look for banks offering customized financial solutions specifically tailored for nonprofits, assisting in managing donations, fundraising, grants, and other revenue streams effectively.
- Donation Processing: Opt for banks providing uncomplicated and affordable donation processing, understanding transaction fees, reporting features, and donor ease of use.
- Fees: Select banks with minimal to no service fees to alleviate financial constraints faced by nonprofits.
- Ease of Use: Seamless online banking ensures efficient and effortless financial management.
- International Transactions: For global nonprofits, choose banking options with low international transfer fees to allocate more funds to your cause.
- Accessibility: 24/7 bank accessibility ensures timely and efficient fund management.
- Customer Service: A bank with excellent customer service ensures quick issue resolution and reliable support.
- Security: Prioritize banks employing advanced security measures to safeguard transactions and account information, protecting against fraud and identity theft.
Evolution of Banking Products for Nonprofits
The evolution of banking products for nonprofits represents a significant shift in how financial institutions address the unique needs of this sector. Over the years, these products have become more sophisticated, providing nonprofits with a range of options designed to support their operations, financial management, and mission-driven activities. Discussing this evolution involves examining both the benefits and the drawbacks of these advancements, offering a more balanced view of their impact on the nonprofit sector.
Specialized Accounts and Services: Many banks now offer accounts and services tailored specifically for nonprofits, including features like lower fees, free banking services, and higher interest rates on deposits. These specialized products can significantly reduce operational costs and improve financial efficiency for nonprofits.
Access to Financing: The development of nonprofit-specific loan products and lines of credit has improved access to financing. This is crucial for supporting capital projects, bridging funding gaps, and ensuring that nonprofits can continue their work uninterrupted.
Financial Management Tools: Modern banking products often include advanced financial management tools, such as online banking platforms that integrate with accounting software, making it easier for nonprofits to manage their finances, track donations, and report on their financial status.
Payment Processing Solutions: The rise of digital banking has brought about sophisticated payment processing solutions, enabling nonprofits to easily accept donations online, at events, or through mobile apps. This convenience can increase the volume and frequency of donations.
Complexity and Overwhelm: With the proliferation of banking products designed for nonprofits, some organizations may find the array of options overwhelming. This complexity can make it difficult for smaller nonprofits, in particular, to choose the most appropriate banking solutions for their needs.
Eligibility and Access Issues: Despite the availability of specialized products, some nonprofits, especially smaller or newly established ones, may face challenges in meeting eligibility criteria or accessing certain services. This can limit their ability to benefit from the best financial tools available.
Cost Concerns: While many products are designed to be cost-effective for nonprofits, the fees associated with certain specialized services or advanced tools can be prohibitive for some organizations. This is especially true for nonprofits operating on tight budgets or those in the early stages of development.
Security and Privacy Risks: As banking becomes increasingly digital, nonprofits must navigate the risks associated with online financial transactions, including data breaches and cyber threats. Ensuring the security of donor information and organizational funds requires constant vigilance and resources.
Nonprofits might be exempt from taxes but that doesn’t mean they’re exempt from working with money. A good business checking account is essential for every nonprofit. A bank account helps keep your money safe and provides essential services for your organization.
Before you open an account, compare multiple options to see which fits your needs. You’ll be working with your bank for a long time, so it’s important to choose the right bank.
Frequently Asked Questions
What kind of bank account should a nonprofit have?
Most nonprofits will benefit from having a checking account. These accounts keep your money safe and make it easy to accept donations as well as make purchases and payments.
Do you need a special bank account for a nonprofit?
Yes, nonprofits need a special bank account due to their unique tax status. They can’t use personal accounts and should instead use business or specific non profit bank accounts.
Can a nonprofit use a personal bank account?
No, nonprofits cannot and should not be used as personal bank accounts. To keep your tax exempt status follow all relevant laws and rules for your nonprofit.
What are the different types of nonprofit bank?
Understanding the various types of banks is crucial before making a long-term commitment to work with one. The three primary types include local banks, commercial banks, and credit unions.
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