I have recently decided that I am going to close my business bank account, for more than one reason:
- My business bank account has a minimum of charge of £10 a month, and even more if I make lots of transfers, so it has a minimum cost of £120 per year. On top of that, I have a business credit card, that comes with my account as standard, which costs £30 per year. So the account in whole comes to £150+ per year just to keep it open.
- The only reason I really have this account open is to save my for my tax – I get paid into my personal account (as most of my clients know me as “Callum Chapman” and not “Circlebox Creative”. I then pay a percentage of that into my business account, which is saved until the end of the tax year – I don’t earn any interest on this – instead it is costing me every year.
- I took out a business loan, paid it all off every month, and use my credit card for big purchases and pay them off within 1-2 months. My business has a perfect credit rating; but when I apply for credit on a personal level, it is hard to get it. As a freelancer I feel I should be making these purchases from my personal account, credit card etc so it improves my own credit rating, especially as I’m planning on buying a house next year.
- It’s a massive pain in the ass having a completely different login (which is hard to remember as it’s just a bunch of random numbers) to check my business account – I want to be able to check it all in one login and make instant transfers between my personal and business accounts.
I have ultimately decided I am going to opt for an e-Savings account which is only accessible online (no debit cards etc) which is attached to my standard savings account. Pros to this are:
- You get interest on the money in the account, and it is fee-free, no matter how much you save or how many transfers you make.
- My bank can see that I have more money in the bank, and therefore are more likely to lend me money in the future (again, thinking of my future house purchase here).
- All accessible from one login, rather than 2 (actually, 3, if you include the business card login which for some reason is separate to my actual business account).
Obviously there are pros and cons depending on the individual, such as being able to accept cheques written out for your company name rather than your own name, but in my situation, I’m finding it’s just a waste of £150 a year – might not seem like much but it is in fact 50% of my annual phone bill – every penny counts, right? Some claim that it is also easier to distinguish the difference between personal and business expenditure, but I’m always so on top of this it really makes no difference to me.
What are you opinions on this, and as a freelancer, how do you manage your accounts? Do you separate your personal and business spendings? Do you get paid into your personal account and then pay a percentage into your tax savings, or do you get paid into your business account and pay yourself a set wage per month? I’m very interested to hear what others do!