Choosing The Right Bank For Your Business (And Why Your Bank Probably Sucks) | Back To Basics

[00:00:00] Brian: Hello and welcome to the six Figure Creative Podcast. I'm your host, Brian Hood. If this is your first time joining me today, first of all, welcome. Thank you so much for giving this podcast a chance. There are like 3 million other podcasts in the world. I looked it up just before this episode, that you could be listening to.

[00:00:14] Brian: So thank you for giving this one a chance, this podcast is for freelancers. Who are trying to earn more from their creative skills and preferably doing it without selling their souls. If that sounds like you, you're in the right place. And for my returning listeners, you are smack dab in the middle, or actually probably more the beginning of the new series called Back to Basics Where I Am.

[00:00:30] Brian: Uncovering all the basics of things that most freelancers either breeze pass without thinking about it or just completely skip over things that I personally might've skipped over myself. Things that I got wrong myself in today's episode is no exception. We're talking about business banking, very dry subject, very boring stuff.

[00:00:45] Brian: When I told my wife what I'm recording today, she goes, yawn, boring. I'm just like, I don't know how to make this interesting. I will say this, I have personally used over 10 different banks in my life through like. the 13, 14 years that I've been doing this[00:01:00] because I have been unhappy and I've always found something that is a deal breaker for me in a bank.

[00:01:05] Brian: So this is something that's like been a lifelong obsession for me, is finding the right bank for my business. I think I've finally done that, but I wanna make sure that anyone who is either unhappy with their bank that they're using right now as a freelancer, and we've probably got plenty of reasons to be unhappy, cuz most banks suck and your bank probably sucks.

[00:01:19] Brian: And two, if you are on the precipice of launching your freelance business and you're trying to decide how do I choose the right bank for my freelance business so I don't have to be like dumb Brian and go through 10 plus different banks over my lifetime? Then also this episode's gonna be awesome for you.

[00:01:32] Brian: If you're just like, I don't really care about banking. I'll listen. Brian. Great. I'll try to make this episode short and sweet. Get to the point. And let's start with the first thing. Most freelancers do this when they're trained to choose a bank for their businesses. They do one of two things. They either one go to just one of the big banks because that's where they've seen the commercials, that's where they've seen the stadium names of, that's where they've seen other people using the Banks of America, the Chase, et cetera.

[00:01:53] Brian: Those are garbage banks. Do not use those banks. If you're using one of those banks. Please God, finish this episode [00:02:00] and then go to the resource I'm gonna send you into this episode where you can just sign up for the bank that I use myself. That I've been entirely happy with. And then I'll show you all of the back behind the scenes of,

[00:02:07] Brian: and by the way, if you just wanna skip this entire episode and use what I use, just go to six figure creative.com/bank, B a n k number six figure creative.com/bank. I will just show you the bank I'm using, why I love it, why I chose it, et cetera. that's the first thing. People just run to those banks and the reason they suck is they tend to nickel and dime you.

[00:02:24] Brian: They do not care about you in any way, shape, or form. And they even limit you in some really weird ways, like just sending money to people. They'll charge you for that. They'll limit how many transactions you can have in your account each month. Like for example, chase Bank account. You can only have up to 20 free transactions in your account.

[00:02:39] Brian: So if you buy more than 20 things or have more than 20 transactions that happen in your checking account as a business, they will charge you for that, it blows my mind that that's a thing that they can get away with and that people sign up for without even realizing it. and when I say nickel and dime you, that's one of the things, but they also will charge you like monthly fees on your account just for existing.

[00:02:56] Brian: this is what pisses me off even more, especially if you're below a certain balance. For [00:03:00] example, I think it's Chase, it's $2,000. If you're below $2,000 in your account, they charge you some monthly fee, which again, so stupid. Like If you're below $2,000, you're the last person that can afford to pay monthly for a bank account.

[00:03:11] Brian: So let's just throw those away. If you have one of those accounts, I've closed a Bank of America account. My life. It's a pain in the ass. I'm so sorry, but just do yourself a favor and go do it. Get it outta your life. The second thing that freelancers do when they're going to choose a bank is they try to be a little smarter.

[00:03:24] Brian: They've probably heard me on the podcast in past episodes, say, oh, just use your local credit union. They're almost always nicer. They're better experienced, et cetera, et cetera, et cetera. While that is true, it is definitely better the big banks, this isn't always the case, but they are typically way behind on technology and in a technology first world where most things are done online these days, those banks are woefully behind. for example, with my personal bank, this is not my business bank, but my personal bank that I have my mortgage through. So I can't just pick up and leave this bank. I still have to use this bank It's a local community bank, and I had a check that I needed to deposit, which I couldn't do from my phone because their technology sucks they won't let me [00:04:00] do that. So I had to go to a physical location, so I'm already pissed off because of that. But when I got there, they were temporarily closed due to staffing issues.

[00:04:08] Brian: So not only were they behind on technology, I couldn't even physically deposit the check at the place, and they didn't have any deposit slips at the thing, which, if you don't even know what that is, I envy you. I couldn't even use the deposit box in the bank because they didn't have any slips for me to put the check into.

[00:04:22] Brian: So this is the kind of stuff I want you to avoid at all costs. Again, the only reason I use this bank is because my mortgage is through it. I'll deal with it, but this is nothing to do with my business banking. My business banking is way better. So the local credit unions are not always the best option, although they are better than the big box business banks that most people know and hate. But in my opinion, the things that have changed in the last few years that have completely revamped the banking sector are these online banks.

[00:04:48] Brian: These are these new generations of online banks. You've probably seen a bunch of them. There's a ton of them. Now, while they're not technically banks, they're typically. Considered a financial technology company. they're almost always backed by [00:05:00] some actual bank.

[00:05:01] Brian: And the benefit you get from these two things, there's, it is usually backed by a local bank or a credit union or something smaller. The, benefit of this is you get better design because these are apps designed by actual software builders, Silicon Valley or something like that. They're like funded startups that actually have great user design.

[00:05:17] Brian: They have a better user experience within the app. They have better integrations, advanced features, and Probably the most important thing just for our safety as freelancers is they're still F D I C insured. If you don't know what that means, you need to know what that means because we've seen some banks failing over the past several months.

[00:05:32] Brian: first Republic Bank just failed. Silicon Valley Bank failed. was one other bank that failed that affected one of my friends. Their company had their money there, And when your money is F D I C insured, that just means that if the bank fails you'll still get your money back from the government up to $250,000.

[00:05:47] Brian: And the danger comes is what happens when you have more than a quarter of a million dollars in the bank? Most people listening to the show right now are not that person. I'm not even gonna speak to the, strategies and what you do around that when you have more cash than that deposit somewhere.

[00:05:57] Brian: But for us, as long as the bank is F D I [00:06:00] C insured, we are fine. Now, I'm not sure what equivalent there is in Europe, Australia, Canada you know what, I'm gonna pause for five seconds and take this out. look this up. Okay, I'm back. I just looked this up. Don't quote me on this. This is just quick research just to give you an equivalent of this. If you're in Canada, they have something called C D I C. That's the Canada Deposit Insurance Corporation that's eligible for up to a hundred thousand dollars in the bank.

[00:06:20] Brian: So if the bank fails, you get at least a hundred thousand dollars back in Europe, there seems to be no unified deposit insurance. I think every bank or every country might have their own thing.

[00:06:30] Brian: So if you're a European listener, just make sure you look into this and make sure whatever bank you sign up for has that sort of insurance. And then Australians, you have something called the F C S, the Financial Claims Scheme. That sounds sketchy scheme, I don't like that word. And that's for up to 250,000 Australian dollars.

[00:06:44] Brian: So there are equivalents of this in other countries, but I'm focused on US banks because that's all I know myself as a US citizen.

[00:06:50] Brian: But no matter what sort of bank you choose, whether you choose one of these like trendy online, kind of banks that have no physical locations, which has some drawbacks, we'll talk about that. Or you go with a local [00:07:00] credit union or something in between. Whatever you do, don't go for the big banks no matter what you choose.

[00:07:04] Brian: There's a few things I want you to look for and whatever bank account that you choose before you commit to that. The first thing to look for is make sure there are no monthly fees.

[00:07:12] Brian: The last thing I want to do is put my money somewhere and then be charged for them to hold my money. Banks make money off of your money in their accounts, they lend that money out. There's something called fractional reserve banking. I'm not gonna get into it now, but it's essentially for every dollar you deposit in, they can loan out up to $10, something like that.

[00:07:28] Brian: It's a ridiculous thing. So they make a ton of money off of the money you've deposited their bank. So, them to then charge you for the right to hold your own money at their bank, where they then are going to lend it out to people is utterly insane. So if they charge you monthly fee, run for the hills, don't use them.

[00:07:41] Brian: Next is, A mobile app that doesn't suck. There are many banks that are pretty decent banks, some very good credit unions in my area especially, but most of them have really bad user interfaces. Not on just the desktop app, but also the mobile app. And if the mobile app is a pain to use to where I don't even want to use it because it's ugly to look at, I can't find what I'm looking [00:08:00] for,

[00:08:00] Brian: Or worse, they don't have a mobile app. again, run for the hills. Don't use that bank. The next thing is you wanna be able to do mobile check deposits. reference my story earlier where I showed up to the bank because I couldn't deposit the check on my phone and I had to do it at the location, and then they weren't even there.

[00:08:14] Brian: They were just temporarily closed because of staffing issues. They are now making their problem. My problem, So not only do you need mobile check deposit, it needs to also be a high limit because truth be told, that bank does have mobile check deposit, but I can only deposit checks up to $2,500.

[00:08:30] Brian: Now, if you don't have checks in your business, you're never getting paid by checks for any reason, maybe you don't care about this as much, but the second you need to deposit a check. And you have to drive to a physical location, which I hate doing. I hate chores. I hate going anywhere. Then you'll want this feature and preferably more than just a $2,500 limit.

[00:08:46] Brian: The bank I use now has a $20,000 per check that I can mobilely deposit for my phone, so I don't have to physically go into a location for any check under $20,000. I can just do it for my phone, which is awesome.

[00:08:58] Brian: Next, you wanna make sure [00:09:00] your bank has integrations with all of the tools that you use. When I say all, I just mean the financial tools. So the payment apps, like the apps that you actually get money from, making sure it's easy to integrate, to make sure the money can get into your account and also tracked properly, making sure it integrates with your bookkeeping app so the transactions that happen in your account can easily get to the bookkeeping app and vice versa so they can talk to each other.

[00:09:19] Brian: make sure if you use any budgeting apps like Winab, or Mint or some other budgeting app that also integrates with that. This is just important so that they can speak to each other. There's no confusion between the two apps, and I've only seen a few banks that actually integrate with other apps like this.

[00:09:33] Brian: the next thing you wanna look for in whatever bank you use is something called sub-accounts. So you have a main account that your bank is in, and that's all your money goes to.

[00:09:40] Brian: But sub-accounts is where you can store additional things like the money for taxes. You can keep that separate out from your main account. You can have a separate account for things like operating expenses. profit owners pay. We'll talk about this later on when we talk about budgeting. But having separate sub-accounts allows you to have all your money in that one account, but separated out by use case and that way.

[00:09:59] Brian: You are [00:10:00] not having to a, open up a bunch of different bank accounts to keep these things separate, which is a pain, and B, you don't end up spending money that you shouldn't spend. For example, when you need to have $50,000 sitting in your tax savings to pay your tax bill at the end of the year, or 15,000 every quarter to pay your tax bill quarterly.

[00:10:15] Brian: If you pay quarterly, then you know that money is there and you shouldn't touch it. Whereas if it's lumped in the rest of your money, you are at danger at spending money you shouldn't spend. So these sub-accounts allow you to then separate the money out into different sub-accounts, so that you don't accidentally spend money you shouldn't spend. The next thing you wanna look for in any bank you use is that it's easy to move money around in preferably large amounts, especially as you get to earn more and more money.

[00:10:38] Brian: You'll find out how annoying it is to have arbitrary limits on transferring monies from clients to you, from you to clients, from you to yourself when you're paying from your business account to your personal account, because we always separate these things. You never have business and personal together in one account.

[00:10:51] Brian: And so that means we need you to pay yourself out your salary or a bonus. Or if you pay yourself in fits and spurts like I used to do, then you wanna make sure that money can be [00:11:00] transferred to yourself easily without having to jump through a bunch of hoops. I'll give you an example. One bank that I used here locally for years made it nearly impossible for me to pay myself every single month for a couple reasons.

[00:11:11] Brian: One is they had no ability do wire transfers. Two. Their transfer limit was like if I did an ACH transfer, it was like a thousand dollars or something. And when you're making more money, that's not nearly enough to be able to transfer yourself any reasonable amount of money. So what I had to do to get money out of my business account into my personal account to pay myself was one of two things. I either had to use that bank bill, pay to mail myself a physical check, which I then couldn't mobile deposit cuz the check was too big.

[00:11:37] Brian: I had to go deposit at the bank, or number two, I had to take that money from my bank account. Transfer it to my PayPal, which takes three days, and then from my PayPal account to my personal bank account, which then takes two to three days. So I have a week's delay between when I take the money outta my business account and then when it gets actually deposited to my personal account.

[00:11:54] Brian: That is so stupid. So make sure whatever bank you use, it is easy to get both money into and out of [00:12:00] without transaction limits that are gonna limit how much money you can move around. Because remember, this is your money.

[00:12:04] Brian: You need to be able to spend it, receive it, do whatever you want with it, and for banks to limit you on how you can use your money, how you can move it around is to me, pretty stupid. Now, there are some reasons to have some limits in certain areas, so every bank has some sort of transaction limits. But just for an example, for my bank to send a check out to myself or someone else, that limit is like a half a million dollars.

[00:12:22] Brian: I can write up to a half a million dollar check before it's gonna limit me.

[00:12:26] Brian: Now there are a few other bells and whistles that some banks have that others don't have, but those are like the core things that I would want anyone who's going to open a bank account, especially today's age, to make sure that they have access to. Depending on your business model and how you do things, some things are gonna be more important than others.

[00:12:40] Brian: For example, if you need the ability to go into a physical bank and deposit cash because you get a lot of cash in your business, then most likely one of these like trendy online only banks are not going to work. However, if you're like most people in today's age where you're getting paid online for everything, You are going to probably love one of these online banks, so if you want to [00:13:00] check out and see a video overview and all the features and all the things that come with the Bank of choice that I use, you can just go to six figure creative.com/bank and I'll have a video in there.

[00:13:08] Brian: I'll have a link to join.

[00:13:10] Brian: And the reason I'm not sharing the exact bank I use is because I want this episode to be evergreen. Meaning if I change my mind in the future and I end up hating this bank, I have the right to change the video on that page and what I recommend on that page, cuz I don't want this episode to be locked into one specific bank, so I'm not gatekeeping.

[00:13:24] Brian: You can literally go there. There's no opt-in, you don't have to sign up for anything. It's just literally just go and there's a video on the page and a button to join that bank if you wanna join it. I'll keep that up to date to whatever it is that I recommended at any given time.

[00:13:35] Brian: So that is my episode on banking for freelancers. If I missed anything, if you see anything, then you're like, oh, Brian you, you messed that up. You need to redo this episode. Brian, you can always email me podcast@sixfigurecreative.com for feedback, input, any ideas or things like that. hopefully this episode has been helpful for you. Hopefully that video on the bank page is helpful for you, where I go over my bank and show you everything from top to bottom.

[00:13:56] Brian: And uh, yeah. is pretty much everything that I have for this episode, [00:14:00] Until next time. Thank you so much for listening to the six Figure Creative Podcast.