Is free business banking really free?

Is free business banking really free?The cost of doing business in the current economy can be crippling, and you need to control your costs as well as you can in order to be successful; a big part of that is finding a fee free business bank account, but is ‘free business banking’ really and truly free?

Wherever you turn, you see adverts for ‘free’ this and ‘free’ that, but with everything, there’s usually a catch.  You’re most likely familiar with this in your personal banking, as you can get a ‘fee free’ current account – as long as you stay within a very narrow range of criteria that’s almost impossible to do – and the business banking world is truly no different.

Limited time offer

Many of the big banks and building societies do offer free business banking services initially, but as soon as you open the account, the clock is ticking: there’s a limit on the largesse and magnanimity of these financial service providers. The lion’s share of banks will offer you no fees whatsoever for an initial 18 to 24 months, but as soon as you exceed this the fees start rolling in – and you can kiss your free account goodbye.

There are some ways around this if you don’t mind crippling your ability to manage your finances. Some banks will offer you ‘free for life’ banking as long as you never set foot in a branch to take care of your firm’s financial affairs, instead relegating you to managing your business bank account over the phone, by post, or through online banking, turning what was originally a convenience into a set of golden shackles that you’ll be penalised if you break.

A last resort for small business banking

If you’re the owner of a smaller business, there’s one more way to get free banking for life that doesn’t actually involve having to go jumping through so many flaming hoops. The Federation of Small Businesses has a partnership with a bank to provide free business banking services for life as long as you remain an FSB member – which costs anywhere from £140 to £120 in membership fees a year, depending on your circumstances.

Now if you’re already a member of the FSB, you could do worse than taking advantage of the deal, as you’re already paying the annual fees to take advantage of all the other things being a FSB member brings. However, if you’re considering membership just to gain access to free banking, you need to decide if it’s worth the money, as you can pay nothing for up to two years with most high street banks as opposed to paying £260 for two years’ worth of FSB membership – sure, it’s not much with all the bells and whistles you get with membership, but it’s still an extra cost that you may not be able to afford if you’re a struggling start up.

In the end, the whole idea of free business banking isn’t exactly a pipe dream, but it is a bit of an illusion; unless you’re going to hop financial service providers every 18 months or so to avoid paying fees on your banking activity or  you’re willing to never set foot inside your local branch, you’re going to end up eventually having to pay monthly fees. These fees may not be particularly high or egregious, but they do add up, so be aware of what you’re getting into and don’t hesitate to change to a different provider if you feel that you’re getting a raw deal.