A survey into small business banking costs shows that a mere 22% of firms enjoy ‘free’ banking, and the remaining 88% pay a total of £2.3 billion per year in banking fees.
The high cost of running a business bank account
The poll, conducted by YouGov on behalf of CashFlows, a financial services company, found that not only were the vast majority of UK businesses paying a high price for the privilege of having a business bank account, but very few had the chance to earn any interest on their deposits.
Just under 22% of businesses in the study pay no monthly fees or transaction charges on their bank accounts, around 24% pay up to £25 per month, 15% pay between £26 and £50, and 10.5% pay between £51 and £100 per month.
The survey’s authors estimate that that businesses pay in excess of £2.3 billion each year in charges and fees.
Of course, in the current climate, it is harder than ever to earn interest on banking deposits, but the majority of business current accounts pay no interest at all, despite the funds being lent out to other customers at healthy rates.
It will come as no surprise to hear that 52% of respondents said they would consider switching to a different banking provider if the costs were lower. In reality however, both businesses and individuals rarely change their banks, due to the perceived ‘hassle’ of doing so.
Best banking offers typically apply to start-ups only
If you are starting up in business for the first time, you will find that most of the major high street banks offer some kind of ‘free business banking’ period – which typically lasts for 12 to 18 months, although some accounts remain competitive indefinitely. We would recommend that you take time comparing accounts before signing up, and make sure you are aware of the ongoing transaction costs and monthly charges which will apply to your account once any free period expires
If you would like to read some useful tips for choosing the best banking provider for your business, try our banking section.