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 services. 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 2022
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:
|U.S. Bank||0.005%||None||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|
|Citizens Bank||N/A||None||200 free transactions per month, Overdraft protection|
|Axos Bank||0.20%||$5 ($0 with a $,2500 monthly balance)||25 free transactions per month, Dedicated relationship manager, Merchant services, Payroll services|
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.
- Interest rates. 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.
- Integrations. 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.
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.
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
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 use personal bank accounts.
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