Traditional Banking vs Modern Checking Apps for LLCs

Although most brick-and-mortar banks offer online banking services, modern checking apps are clearly coming for their money.

Between traditional banking and modern checking apps, where should you put your money? Granted, both of them will take care of your funds if you're running an LLC, however they have differing features. This includes interest rate, pricing, available services and so on. Accordingly, it helps to know the advantages and disadvantages of each which is precisely what we've covered on this page for you.

Differences Between Traditional Banking and Business Checking Apps

First off, traditional banking is done by brick-and-mortar banks, and although most of them have websites and apps, their online platforms are simply gateways for accessing the same services that you would get if you walked into their banking halls.

For example, usually a bank would charge you the same interest on a loan regardless of whether you applied for that loan online or physically (in person).

Checking apps, on the other hand, are purely online. These are companies that don't have physical banking halls that you can visit. Their biggest advantage is that they have low operation costs and can therefore charge lower interest rates on credit and offer better rates on deposits.

Below we have a more detailed breakdown of the major differences between traditional banking and modern checking apps:

Access

Traditional banks have physical locations and local branches that you can visit to do your banking. They're usually staffed with employees who can help you with a variety of services - including opening a checking account for your business. While this type of service delivery has a personal touch to it, it's also time consuming. That's why some banks will allow you to complete some services online via their website or app.

Checking apps, on their part, are fully online-based. They don't have physical locations that you can visit. Instead, you do all your banking through the web or app. This tends to speed up the process and save entrepreneurs a lot of time.

Because they are based online, checking apps focus on user experience. You'll, therefore, find that they have very intuitive interfaces. A good example is Hatch Business Checking, which has a dashboard where you can perform pretty much any task that you would in a brick-and-mortar bank - except in a shorter time.

ATM

Most traditional banks own a network of ATM machines. That's great because you can access funds in your business's checking account fairly easily.

However, checking apps have the edge as far as access to funds - provided you don't need paper cash. You can transfer money, make payments, receive payments, write electronic checks and more straight from the app.

Better yet, you can transact your LLC checking account at any time of the day or night from any location. You, therefore, won't need to visit an ATM to make a transaction.

That said, modern checking apps also liaise with ATM service providers. This ensures that their customers have access to paper money whenever they need it. For instance, Hatch’s Business Checking allows you to use their partner network of 55,000+ ATMs with no fees.

Fees

Brick-and-mortar banks usually charge higher fees to open and maintain a business checking account. In fact, the number of hidden charges is staggering:

You may be required to pay a monthly service fee, excess transaction fee, cash handling fee, NSF fee, analysis fee, overdraft charge, wire transfer fee, minimum balance charge, returned deposit charge, hardcopy statement fee, ATM fee, lost card fee, foreign transaction fee, inactivity fee, account closing fee etc.

Add them up and your business will be losing hundreds, if not thousands, of dollars each month. The same can't be said for checking apps. They typically have lower fees & no NSF fees; some are even free.

Interest on savings & cashback

Another huge drawback of traditional banks is that they offer lower APY compared to modern fintech apps. Holding your business’ money in a brick-and-mortar bank is mostly pointless because virtually no bank offers more than 0.10% APY.

On the contrary, some modern fintech apps offer interest or cashback on checking accounts as well which they're able to achieve because they don't have the operational costs of traditional banks. For instance, Hatch offers up to 5% cashback rewards on qualifying purchases.

Credit Checks

Traditional banks typically have stricter requirements than modern fintech apps in order to create an account. A bank may run a credit check or check your past banking history before allowing you to open a checking account for your small business.

It's the direct opposite with many modern checking apps. A company like Hatch doesn't do hard credit checks when approving checking accounts for small businesses. For that reason, entrepreneurs are more likely to get approved for a modern checking app than a bank.

Conclusion

From the foregoing, it's easy to see that modern checking apps have tailored products for LLCs and small businesses. Traditional banks on the other hand, are harder to obtain and have less perks for most business owners. Therefore, if you're looking for better rates, online convenience, and low fees, then you'll certainly want to consider a checking app.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes