When starting a business, one of the first tasks you need to tackle is opening a checking account. Unfortunately, business checking accounts from traditional banks are often expensive to maintain. Thankfully, several online banks have come to the rescue with free checking accounts featuring low to no minimum balances. As a leader in online banking, is Ally business checking a sound option?
What Are the Features of Ally Business Checking?
Unfortunately, Ally does not offer a checking account geared toward businesses. Instead, it offers a personal checking account that some people repurpose for business uses. So, what is it that makes Ally appealing to business owners?
24/7 Customer Service
Most banks offer customer support during business hours or during a 12-hour slot. Being able to reach an Ally agent all day every day gives business owners peace of mind.
No Monthly Fees
When banks charge checking account fees, it can quickly begin to eat away at your profits. This is especially difficult if your profits have a slim margin.
Free Services
Ally does not charge customers for checks, debit cards or using ATMs outside of the company’s expanding network. You even get free bill-paying services.
Interest
Traditional banks rarely pay interest on checking accounts. Ally pays 0.25% APY on account balances over $14,999 and 0.10% APY for lower balances.
Mobile App
Like most online-only banks, Ally provides a robust app. It makes it possible to do everything from setting up automated payments to deposit checks.
Who Would Use Ally Business Checking?
Accountants generally discourage business owners from using personal accounts for business purposes. However, there are some people who may find a personal account adequate.
Gig Workers
If your business is more of a side hustle than a full-time career, a business checking account may not be worth the hassle. Instead, a designated personal checking account could work fine.
Freelancers
If you are an independent contractor or freelancer who has not incorporated your business, you may not be eligible for a business checking account anyway. Ally provides a starting point.
Sole Proprietor
The main reason accountants dislike the idea of using personal accounts for business is financial separation. However, sole proprietors are not economically separate from their businesses.
Digital Nomads
If you make your money while traveling, access to an online bank makes even international work and travel a breeze. You may still get a business account to use alongside Ally.
When Should You Use Ally Business Checking?
Always seek advice from your accountant or another financial professional before making decisions on what is right for your finances. These situations are general recommendations.
For Earning Interest on Taxes
Business owners often make estimated tax payments every quarter. Instead of keeping the money in the business checking account, some may choose to move it to an interest-bearing account. This allows the money to earn interest, which the business owner can pocket before paying the principal as taxes to local, state and federal governments.
When Paying Personal Salary
Even if you have a traditional business checking account, you still need an account to pay yourself to. Ally’s personal checking account is an excellent option to consider. Keep in mind, however, that employers cannot push employees to use a specific bank for receiving payments.
During Early Business Stages
When you first get your business up and running, you may not make enough deposits to qualify for a traditional business account. You may have no other choice but to use a personal checking account until that situation changes and you find a bank that better suits your needs.
Examples of Using Ally Business Checking
Example 1
Philip recently graduated with a degree in design and wants to try his hand at being an entrepreneur before finding a corporate job. He finds a few clients on an online freelance platform and receives his payments via PayPal.He then transfers the money to his Ally personal checking account. After six months, he finds more clients off the platform and registers his business. He then opens a business checking account with another bank and continues to accept his personal salary through his Ally checking account.
Example 2
Dana is an independent contractor running a micro-business that builds apps for online stores. She makes $5,000 in gross sales each month and sets aside 30% of this for taxes. Dana transfers $1,500 to her Ally personal checking account, each month, where it earns 0.1% in interest. Every quarter, she withdraws the principal balance and pays her taxes. She then keeps the interest for herself.
Steps for Opening an Ally Checking Account
Like most online banks, Ally makes it easy to open an account. These steps can help you get started:
- Visit the Ally website and click on its checking account web page.
- Click the Open Account button.
- Confirm the type of account you want to open.
- Determine your initial deposit, if any.
- Provide requested information to confirm identity and eligibility.
- Consent to online statements only.
- Sign a form to consent to receiving a Form 1099-INT for interest earned.
- Wait for a minute or less to receive an approval or denial decision.
- Complete security questions.
- Make the initial deposit, if preferred.
Quick Questions
What if I want an actual business checking account?
There are many online and traditional banks that cater to small businesses. Here are a few options:
- Axos Bank
- Huntington National Bank
- First Citizens Bank
- Bank of the Ozarks
- Navy Federal Credit Union
Are there downsides to using personal checking accounts for business?
Personal checking accounts do not offer the same services as business checking accounts. You may also complicate your taxes, so always consult a financial professional.
Why are online checking accounts cheaper to own?
Online banks enjoy much lower overheads than brick-and-mortar banks. This allows them to pass on savings to customers.
Are you still looking for an alternative to Ally business checking? Our blog can help.
