The Complete Guide to Online Banking for Nonprofits
Finding the perfect bank for your nonprofit is crucial for your organization’s financial success. With so many options available, it’s essential to research each platform thoroughly to find the one that best suits your needs. Don’t overlook the benefits of online banking, even if your organization has accounts at physical branch locations. Many nonprofits are making use of online banking services to streamline their financial operations and reduce costs.
Our comprehensive guide covers everything you need to know about online banks for nonprofits. Read on to discover how online banking can benefit your organization and how to choose the best online bank for your nonprofit. Here’s a sneak peek of what we’ll cover:
Why Should Your Nonprofit Use an Online Bank?
Are you wondering if an online bank is a right choice for your nonprofit? Consider these top reasons why many organizations are choosing online banking:
Lower Cost
Online banking is an excellent option for small nonprofits due to the cost-effectiveness of the platform. Unlike traditional banking methods, online banks are usually less expensive, making them a more suitable option for smaller organizations. Smaller banks, in particular, can quickly add up fees, which is why online banking has become a popular choice. Many online banks offer free banking services, only charging for specialized services. With online bank accounts, there are typically no startup fees, deposit fees, transaction fees, monthly payments, or other charges commonly associated with traditional banking.
Less Restrictive
Online bank accounts offer more flexibility and fewer restrictions compared to traditional banks. Unlike physical banks, they usually don’t require a minimum balance, initial deposit, or monthly maintenance fees, and allow unlimited transactions. This is because many online-only financial institutions are not traditional banks but instead financial technology companies that generate revenue through advertising, third-party services, and subscriptions rather than endless fees. By opting for an online bank account, nonprofits can save money and avoid the hassle of fees and restrictions imposed by traditional banks.
Easier to Open
Opening a bank account for a nonprofit can be a tedious process, involving several requirements that must be met. One of the primary demands is a banking resolution that details who has access to the account and what types of transactions they can carry out. These resolutions help to establish clear lines of authority and protect the nonprofit’s financial interests.
Creating an online bank account for your nonprofit is hassle-free and can be done completely online. The process is simple, and most importantly, time-efficient. Plus, online banks offer a seamless mobile banking experience with features such as remote deposit capture. This means that you can deposit checks from anywhere by taking a photo with your smartphone and uploading it to the bank’s app or website.
More Competitive Rates
Online savings accounts can be an excellent choice for nonprofits looking to save money. They often offer competitive interest rates, and in some cases, higher annual percentage yields compared to traditional banks. However, while online banking can provide low or no-cost banking, it may come with some disadvantages. For instance, some services, such as bank loans and in-person customer service, may be less accessible. Online banks often limit options to basic checking and savings account features, although some companies offer foreign currency transactions.
Although online banking may be a cheaper option, it may not necessarily be the best choice for your nonprofit. It is crucial to ensure that the service aligns with your organization’s requirements and that your staff is comfortable utilizing online banking technology before making a decision.
How to Choose the Right Online Bank for your Nonprofit?
Choosing the right online banking option for your nonprofit can be a daunting task, as there are numerous options available. However, considering the following criteria can help you select the most suitable option for your organization.
Define Your Nonprofit’s Banking Needs
Before you start your search for an online bank, it’s essential to determine what banking services your nonprofit requires. This will help you identify the best bank that meets your specific needs.
Consider asking yourself the following questions to help you make a more informed decision:
When searching for the best online banking option for your nonprofit organization, it’s essential to identify your banking needs beforehand. This will help you find the right banking solution that meets your specific requirements. Consider asking yourself the following questions:
- Do you need a checking account, savings account, or both?
- Do you already have a primary bank account that offers most of the features your nonprofit requires?
- Do you need a mobile banking solution that eliminates the need for in-person transactions, especially when you’re always on the go?
- Ensuring the security of your nonprofit’s funds should be a top priority when choosing an online bank. Consider what security features are necessary for your organization, such as two-factor authentication, encryption, fraud detection, and FDIC insurance. Make sure the bank you choose provides the necessary security measures to protect your funds and sensitive information.
Selecting the right bank for your nonprofit is crucial, as it can be challenging to switch once you have committed. Taking the time to research and evaluate your options before finalizing a business account is essential to ensure you make the right choice.
Ask Your Treasurer to Help You Compare Existing Online Banks
Collaborating with your nonprofit treasurer to assess your banking requirements and creating a checklist can help you narrow down your options while researching potential bank accounts. Your treasurer’s insights are crucial since they will likely be the primary user of the account.
Take the time to compare bank offers, services, fees, and other features to make an informed decision about the best bank account for your nonprofit organization.
Anticipate Your Banking Needs for the Next Few Years
Anticipate the future needs of your nonprofit when choosing a bank account and avoid additional fees by evaluating all account rules and regulations. Don’t just focus on your current needs; think about how your organization will evolve.
It’s important to have a plan in place to ensure you won’t reach bank account limits too quickly. Make sure to carefully review all fees and account features for any bank where you hold funds, whether online or in person.
How to Open an Online Bank for Your Nonprofit
To ensure proper compliance, it is important to meet specific requirements when opening and maintaining a bank account for your nonprofit organization.
Make Sure Your Nonprofit is Correctly Declared in Your State
Properly declaring your nonprofit and meeting state regulations is a crucial requirement for opening a bank account. Before proceeding, make sure you have filed the necessary documents such as articles of incorporation, as required for nonprofit corporations. Even if you are not a corporation, your state may still have specific requirements. It’s important to contact them directly or visit their website to obtain the correct information to avoid potential issues. Remember, being proactive is always better than being sorry.
Acquire Your Nonprofit Status and EIN
Applying for official recognition as a tax-exempt entity through the IRS website is a crucial step before opening a nonprofit bank account. Form 1023 is the document you will need to fill out. Additionally, you will also need an Employer Identification Number (EIN), which you can also apply for on the IRS website. The website provides many resources such as tutorials and FAQs to help you navigate the process.
Gather All Necessary Documents Required For Opening Your Account
Ensuring you have all the required documents in hand before you begin the bank account opening process can save time and hassle. Typically, you will need to provide the following:
When opening a bank account for your nonprofit, it’s important to gather all necessary documents beforehand.
This typically includes your recorded articles of incorporation, the EIN, nonprofit bylaws, a list of current officers, and government-issued photo ID and Social Security numbers of authorized transaction makers.
Providing the necessary documents demonstrates that your nonprofit has met the required legal procedures in registering as a nonprofit corporation in the state, has obtained an EIN for conducting business transactions, and operates with charitable intentions. With these documents in hand, you are prepared to apply online to open your nonprofit bank account via the bank’s website.
The 5 Best Online Banks for Nonprofits in 2022
Are you searching for online banking options for your nonprofit? Here are five banks that offer online banking services for nonprofits, which can help you start your search:
TIAA Bank
Despite being founded over a century ago, this bank has adapted and evolved with the times.
Pros:
- Offers the ability to bank 100% online
- Offers protection from overdraft fees
- Interest opportunities for some accounts
Cons:
- Higher initial deposit requirement
- Minimum balance of 5,000 dollars
- The lack of physical branches can make it more difficult to withdraw and deposit donations
Wells Fargo
Wells Fargo is a trusted and established financial institution that offers features that many nonprofits find appealing.
Pros:
- Easy to waive any monthly fee
- Offers specific nonprofit accounts
- Provides access to a large number of ATMs
Cons:
- Monthly fee (if you forget to have it waived)
- A limited number of free transactions before the application of a service fee
BlueVine
BlueVine, a Silicon Valley-based bank, may be new to the nonprofit banking scene but offers an innovative banking solution for organizations.
Pros:
- Provides an exceptionally tech-savvy presence in online banking
- No transaction fees
- No overdraft fees
- Ability to earn an AYP
- Easy integration into financial software
Cons:
- A lack of physical branches makes depositing cash difficult
PNC Bank
Ranked as the 7th largest bank in the U.S. by asset size, PNC has established a reliable reputation over time.
Pros:
- 150 free transactions a month
- Special accounting specifically for nonprofits
- Waivable monthly fee
Cons:
- Limited branches are available in the U.S.
U.S. Bank
U.S. Bank is a reputable and established financial institution that offers a wide range of benefits to nonprofit organizations.
Pros:
- No monthly maintenance fees
- Up to $300,000 in free cash deposits
- 1,800 free transactions per year
- Potential to earn interest with some accounts
Cons:
- Setting up an account requires a discussion with an account representative, which adds time to the process
- Limited branches available
FAQ
What do you need to open a bank account for my nonprofit?
Are you wondering how to open a bank account for your nonprofit organization? The process involves ensuring your nonprofit is properly registered in your state, obtaining your nonprofit status and EIN, and gathering all necessary documentation required by the bank. For more information, read on.
Which bank is best for a nonprofit organization?
Discover the top 5 online banks for nonprofits that we highly recommend: TIAA, Wells Fargo, BlueVine, PNC, and U.S. Bank. Each of these banks has unique features such as low or no monthly maintenance fees, interest-bearing accounts, and no transaction fees. Conduct thorough research to choose the bank that best fits your nonprofit’s requirements. Don’t hesitate to explore the various options before making a decision.
Can a nonprofit organization have a bank account?
If you’re looking for a cost-effective and hassle-free way to open a bank account for your nonprofit organization, online banks can be a great option to consider. These banks typically offer lower fees, fewer restrictions, and a streamlined account opening process compared to traditional banks. With the convenience of online banking, you can easily manage your nonprofit’s finances from anywhere.
