Business Banking

Business checks vs. personal checks, how are they similar and different?

What is the difference between business checks vs personal checks? In this post we go into depth explaining what situations you might need a business check compared to a personal check.

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Business Checks vs. personal checks, how are they similar and different?

What is a personal check? What is a business check? Learn more about their similarities and differences before heading to the bank.

Writing checks in today's digital world seems like a thing of the past. Especially when you have your debit card and credit cards available to you from the convenience of your mobile phone. However, are checks going extinct? Not quite. Some 14.5 billion checks worth $25.8 trillion were written in the U.S. in 2018. In fact, up to 97% of small businesses still accept paper checks. In addition, small businesses also use them for payments. Therefore, if you own or manage a small business, you might need a Nearside Business Checking account.

With that being said, you may be wondering what is a personal check? How does Nearside Business Checking differ from your personal checking account? And how do personal checks differ from business checks? Read on to find out everything there is to know about the available types of checks.

What Are Business Checks?

Simply put, business checks are checks that are associated with business checking accounts. You get a business checking account - like the Nearside Business Checking account - when you open a checking account at a financial institution or online banking website strictly for your business. It's, therefore, not yours as an individual. Instead, it allows you to write business checks against your company's assets, not your personal bank account.

For example, as an employee, you likely receive your salary every two weeks in the form of paper checks. Of course, you are required to deposit this form of payment into an ATM. Alternatively, your salary may be directly deposited into your personal bank account.  This allows you to avoid taking your money to a financial institution to be deposited. Regardless, when receiving a check in person from your employer, it will always be a business check. This is because the payment is withdrawn from a business account. In addition, all the information on the business bank check will relate to your employer.

When do you need to use business checks?

The IRS recommends that all small businesses maintain separate checking accounts from their owners' personal bank accounts. If your company has its own checking account, then you can use that account to issue business checks. Such checks may cover expenses like payroll, insurance, utility, stock purchase, any large purchases, etc.

As a small business owner, it makes more sense for you to have a business checking account. This simplifies the accounting process. It also establishes your organization as a separate legal entity. As such, the business's creditors cannot come for your personal property. Thus, if the company fails to meet its financial obligations, you have protection.

In addition, your business stands to enjoy tax deductions from maintaining its own checking account. And if you open a Nearside checking account, then you also get 2.2% universal cashback rewards in 2022. There are also no monthly fees or monthly minimums.

You don't even pay card replacement charges. It really is tailored for small businesses. And, the best part is that you can use business checks to make payments straight from your Nearside Business Checking account.

Can you use Nearside as a personal account with personal checks?

No, Nearside is strictly for businesses, specifically small businesses starting out or growing.


What Is a Personal Check?

A personal check is a check that's meant for your own personal use. It’s a slip of paper that instructs your bank to transfer money from your personal checking account to a payee's account. Needless to say, if you're the payee, then a personal check transfers cash from someone else's account to yours.

When do you need to use personal checks?

Personal checks usually come in handy when the payee requests that you pay by check. Some small businesses neither accept credit nor debit cards. In contrast, some won't allow you to pay cash if the amount exceeds a specific value. Such cases bring personal checks into the picture.

However, if you are a small business, it is essential to keep in mind that a personal check is not a secured check. This means that while the payee can write your business a check for any amount of money. Therefore, they may have insufficient funds in their personal bank account. As a result, when you go to the ATM to cash this check, it will bounce. You also risk going unpaid until the payee has enough money in their bank account.

On the other hand, if you choose to write a personal check without having enough funds in your account, you can be charged an overdraft fee.

How to Avoid Bouncing Checks as a Business Owner

If you're a business owner who accepts paper checks, you may run into trouble with customers paying with personal checks. This happens if your customer does not have enough money in their bank account. Therefore, consider asking customers for certified checks or cashier's checks instead to avoid bouncing checks. Let's take a closer look at what these types of checks are.

Cashier's Checks

This check withdraws money from a financial institution's total funds on behalf of the payee. It is typically signed by a bank representative. Additionally, it guarantees the individual receiving the cashier's check gets the full amount that is owed. Further, once the check is drafted, the amount is credited to the check writer's account number. Lastly, the money is then provided to the bank.

Certified Checks

Furthermore, a certified check is similar to a cashier's check. However, rather than drawing money from the lender's funds, the lender will certify that the payee has sufficient funds in their checking or savings account. In addition, the bank will confirm the signature of the account holder. They are again ensuring that the individual or business receiving the check is paid the total amount owed.

Moreover, both certified and cashier's checks are typically used when individuals make large purchases such as cars, home renovations, or down payments on a property.

Similarities Between Personal Checks and Business Checks

Personal checks and business checks are more different than they are similar. However, they do share a few things in common. For starters, you can cash or deposit a check regardless of whether it's business or personal. The process varies; therefore, read on to find out how to use both types of checks.

Meanwhile, another similarity between personal and business checks is that they contain the same basic information. Alongside a bank routing number, a check has a date, payee, check number, amount payable, and signature line.

Differences Between Personal Checks and Business Checks

As already mentioned, business checks and personal checks are pretty different. They differ in size, design, print, cost, security features, and how they are used. Below is a detailed breakdown of the same.

Size

Business checks are generally more extensive than personal checks. While the latter measure 5 to 6 x 2 inches, business checks measure 8 x 3 to 5 inches.

Their large size makes business checks easier to print, just in case you want to print yours in-house. On the other hand, personal checks are smaller because they're meant to fit in wallets and hand pouches.

Design and Branding

In terms of appearance, business checks are typically meant to look professional, and that's because they are part of your business's branding. As such, they often carry your company's name, address, logo, and other formal information.

Personal checks are less professional and artsier, and they're usually covered with vibrant images of animals, sports, graffiti, landscape, etc. It all depends on what you want on your cheque. For that reason, personal checks portray individuality more than professionalism.

Print

The payee's information in a personal check is almost always handwritten. That's not the case with business checks. On the contrary, they are almost always filled out on the computer and printed out to look more professional.

The only part that's always handwritten in a business check is the payor's signature. If you're the business owner, then your handwritten signature must be on the check to validate it.

It's also worth noting that when filling a personal check, you can often leave out several details. This includes, the name of the payee, amount number, account details, and date. The payee fills those when they're ready to deposit or cash the check.

Cost

How much do business checks cost? That depends on the issuer of the check. Banks are typically the most expensive. They can charge as much as 30 cents per check. But, you do have cheaper ways of getting business checks. For example, retailers like Costco, Walmart, and Sam's Club offer business checks at much more affordable rates compared to banks. Better yet, the Nearside Business Checking account allows you to send five free business checks per month.

The downside is that Nearside doesn't have personal checking accounts. You, therefore, can't get personal checks from Nearside, but you can get them from big retailers like Costco and Walmart at an even lower price than business checks.

That's not to say that you shouldn't or can't get personal checks from your bank. Make sure to ask about their pricing criteria. For example, Discover gives its customers personal checks for free. On the other hand, Bank of America has free personal checks for those with premium checking accounts.

Security

Are business checks safe? Very! Alongside the standard protection that comes with all checks, business checks have additional security features. They include:

· Custom-designed signature lines

· Bleed-thru numbering

· Authentic and artificial watermarks

· Intricate pantographs and borders

· Step-and-repeat pantographs

· Warning bands

· Thermochromic ink

Just in case you're wondering, the standard protection in most checks - including personal checks - includes a security screen, warning box, padlock icon, chemically sensitive paper, fluorescent fibers, erasure protection, and a microprint signature line.


How To Use Business And Personal Checks

The process of issuing a check is simple regardless of if it's a business or personal check. You fill out the check, and then the payee will either deposit or cash it.

If you're a sole proprietor, then your sole signature will be enough to validate the check. On the other hand, if you have partners, then your bank may ask that all the partners (or managing partners) sign the check to validate it.

What if your business is the one receiving a check? Well, that changes a few things. First of all, you can accept both personal and business checks as a business. And you can either cash or deposit them.

Cashing or depositing a personal check is pretty straightforward. Take it to your bank and either cash or deposit it in the business checking account. If your business doesn't have a checking account, you can still cash the check with the bank that issued it.

Alternatively, you can go to a retail store that offers cashing services. Walmart and Kroger are just some of the big names that cash checks, but many corner stores do too.

Depositing a business check you've received is just as simple as depositing or cashing a personal check. In fact, you don't even need to deposit a business check yourself (as the business owner). Anyone can do it on your behalf; they don't even need to be signatories to the business's checking account.

The tricky part comes when you need to cash a business check made out to your business. For one, most traditional banks don't allow you to cash them even if you're the business owner, but you may be able to cash the check at the bank where your business has a checking account.

The number of people allowed to cash a business check is also limited. For example, if you're a sole proprietor, then only you can cash a business check. You may want to add a DBA (doing business as) designation to your business's checking account to cash checks that are made out to you personally and your business. If, for instance, your name is Andy and your business is called Reliable Electric, then the business checking account will be "Reliable Electric, DBA Andy." In which case, you can cash checks addressed to you, and those addressed to your business.

If the business is a corporation, limited liability company, or partnership, anyone signatory in the firm's checking account can cash a check. Depending on your bank's requirements, you may also need to sign at the back of the check to validate it.

Should You Use Personal Checks for Business Transactions?

At this point, you're probably wondering, "can I use personal checks for a business account?" After all, personal checks are less expensive and conveniently smaller.

No law prohibits you from using personal checks for your business account. If you take that route, you will avoid the expense of purchasing business checks.

However, using personal checks for business lowers your business and personal credibility. Besides, business checks have additional security features that will offer your business extra safety in checking transactions. You can merge your checking system with your accounting software like QuickBooks for easier accounting.

Just as important, using a business checking account (and thus business checks) makes your business eligible for deductions. To top it off, you as the owner enjoy limited liability, which means business creditors can't sell your personal property to recover the money owed.

Therefore, while it's possible to use personal checks for a business account, it is better to have a dedicated checking account for your business. That will make it a lot easier to separate business from personal transactions.

Don't have a business account? Or perhaps you would like to try an alternative to your current business account? Check out the new Nearside Business Checking account for small businesses. It's tailored for the unique needs of a small business that's starting out and growing.

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