What to Consider When Taking Out a Free Business Bank Account

Although some business bank accounts advertise themselves as free, it's worth looking into any additional fees and the functionality the account offers. Learn if you can access a free business bank account, how to understand what ‘free’ really means and why you might want to pay for one.

Hannah Smith Last updated on 22 March 2021.
What to Consider When Taking Out a Free Business Bank Account

Everyone loves to get something for nothing, but unfortunately in life there’s no such thing as a free lunch. Even when something appears to be ‘free’, there are often strings attached. That’s certainly the case when it comes to business banking.

What is a free business bank account?

You won’t find a truly free business bank account, because ultimately banks are out to make a profit, but you can certainly find accounts with lower headline costs and more competitive transaction fees.

To avoid paying more than you need, it’s worth shopping around to try to find the right business bank account at the right price. Some business bank accounts advertise themselves as free, in that they don’t levy a monthly or annual charge. However, they will often charge you for certain types of transactions, and they typically come with conditions attached, so not every business will be able to get one.

Am I eligible for a free account?

Some banks only offer their free bank accounts to businesses of a certain size. There may be eligibility criteria for opening an account, whether free or fee-paying, such as limited company directors being UK residents, their company being solvent, and not being involved in certain business sectors deemed high risk, such as escort services, vehicle sales, virtual currencies, money transfers, or the trading of precious metals or stones. You may also have to have a personal current account with the same bank in order to apply for a business bank account.

» MORE: How to open a business account in the UK

Are there any charges with ‘free’ accounts?

Often there are. Firstly, a ‘free’ account might not be free forever – some accounts offer a free introductory period before they start charging fees.

Even if a bank account doesn’t ever charge you an annual or monthly fee, there can be individual charges for different transactions such as money transfers, paying in money, ATM cash withdrawals or cancelling a lost cheque.

Sending international payments can be especially expensive and you can suffer a double whammy of high fees and a poor exchange rate, so if this is something you do often, look for an account with competitive overseas money transfers. Some banks have minimum and maximum balances on their accounts, and you could be penalised if you breach these, so make sure you know what they are.

As with any bank account, there may be penalty fees if you go over an agreed overdraft, a cheque bounces or a direct debit is rejected. There can also be admin charges if you need hard copies of bank statements or additional or replacement cards, for example.

» MORE: Everything you need to know about business bank account charges

How to get a free business bank account

Start by looking at best-buy tables and comparing the bank accounts out there to see which ones look like the best fit. For some people, cost is everything, but others may be more focused on functionality, mobile or online first banking, counter services, speed of approval, or good customer service.

Once you’ve got a couple of accounts in mind, read their eligibility criteria – this can typically be found in the small print on their websites – to make sure there’s nothing obvious that could scupper your application before you apply. Then you can gather your documentation and make your application.

» MORE: What you need to open a business bank account

Can I switch to a free service?

If you’ve already got a business bank account that charges fees, you may be able to switch to a free one from another provider. Companies with fewer than 50 employees and annual turnover of less than £6.5m can use the Current Account Switch Service for easy, automated switching, but bear in mind that not all banks participate in the scheme.

» COMPARE: Business accounts for switchers

Is it ever worth paying for a business bank account?

It might be, depending on how you run your business. If you use branch services to deposit cash frequently or often pay in cheques, it could be worth going for an account with a monthly fee but which charges less per transaction.

There are other things too that could make a paid-for account look good value, such as the ability to sync with your accounting software, or cheap international money transfers if you have overseas clients or suppliers. Customer service is important too – you don’t want to risk business interruption because of a problem with your bank account.

Remember that price and value are not the same thing, so the cheapest option may not be the right one for your business.

» COMPARE: Business bank accounts

Image source: Getty Images

About the author:

Hannah is an award-winning journalist with a background in the trade press. She writes about finance, asset management and business for Shares, Citywire, FE Trustnet, and interactive investor. Read more

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