How to Choose a Bank For Your Freelance Business
Your bank should not be an additional source of stress.
When you start freelancing, the money stuff hits fast. You're chasing invoices, tracking expenses, setting aside money for taxes — and suddenly, your personal checking account is doing double duty.
Choosing the right bank matters more than most freelancers realize. The wrong one might lack features, add unnecessary fees, or (at worst) give you a terrible experience when a problem comes up.
I've worked in the banking industry or adjacent to it for most of my career, starting as a bank teller and eventually becoming the product manager of a banking software company. When I pivoted to a new path as a freelance fintech writer, finding the right bank mattered a lot to me.
Based on my decades of experience, here's what other freelancers should consider when choosing a bank.
Why freelancers need a separate bank account
If you're freelancing and still running everything through your personal checking account, you're making things harder than they need to be.
A separate business account keeps your freelance income and expenses in one place. When tax time comes, you're not scrolling through months of transactions trying to figure out which Amazon purchase was a business expense and which was something personal.
It also protects you. If you ever get audited, having clean records with a dedicated account makes the process far less stressful. And if you're structured as an LLC, mixing personal and business funds can weaken the legal protection your LLC provides.
This doesn't have to be complicated. Just do the following:
- Open a business checking account
- Route your client payments there
- Pay your business expenses from that account (or use a separate business credit card and make the payment from this account)
- Transfer what you need for your living expenses from your business bank account to your personal bank account
I have automatic payments set up, twice a month, to pay myself (the 15th and last day of the month). This matched my experience as an employee in the corporate world. If your income is less stable, you could "pay yourself" when money from clients comes in, keeping a percentage in your business funds, and transferring the rest to your personal account.
Anna Burgess Yang
Types of financial institutions for freelancers
Not all banks are the same, and the word "bank" is often used to refer to several types of financial institutions. Here are your options.
Traditional banks
This includes both big national banks (think Chase, Wells Fargo) and community banks. National banks have polished online banking and branch access everywhere, but they also tend to charge higher fees and treat small accounts like an afterthought. Banks in the U.S. are insured by the FDIC, which means if the bank collapses, your money is protected (up to the $250,000 limit per depositor).
Community banks are the opposite. They reinvest in local economies, offer great customer service, and genuinely care about small business owners. The tradeoff? Their technology can be hit-or-miss. Some community banks have invested in modern online banking, and some feel like they're stuck in 2010. Often, you won't know until you open an account and log in for the first time.
There are also regional banks, which are in between. They're much larger than community banks and may serve several states, but are much smaller than national banks. Regional banks can be a nice option if you don't want to use a big bank, but can't find a good community bank in your area.
Credit unions
Credit unions operate similarly to community banks but are member-owned. Membership usually just requires living in a specific area. They tend to offer lower fees and competitive rates, and some have better technology than community banks. If you want to bank local, don't overlook your nearest credit union.
Credit Unions are insured by the NCUA, which is similar to the FDIC and offers the same level of protection.
Neobanks (fintech-backed)
Neobanks are financial technology companies that partner with FDIC-insured banks to offer banking services. You interact with the fintech's app and customer support, but your money is held at the partner bank. Your deposits are still covered by FDIC insurance (protection follows the bank, not the app).
Many neobanks are built specifically for freelancers and small businesses, with features like built-in invoicing, automatic tax savings, and expense categorization. They typically charge no monthly fees and have no minimum balance requirements.
The downside is that you're adding a technology layer between you and your money. If the fintech has a software issue, your account might show incorrect information even though your funds are safe at the partner bank. An example of this is Synapse, which was the technology layer between several fintechs and their partner banks. Synapse collapsed, leaving about 100,000 Americans locked out of their accounts.
Personally, I've chosen a neobank for my business. However, I'd be remiss if I didn't mention the slight increased risk of a neobank versus banking directly with a bank or credit union. Synapse is perhaps an anomaly, but the fallout did shed light on the issue with choosing a neobank.
Digital wallets (PayPal, Venmo, etc.)
Platforms like PayPal and Venmo make it easy for clients to pay you, but they are not banks and should not be where you store your money. They are payment processors and don't provide any insurance for money stored directly in your digital wallet. This information is right on PayPal's terms and conditions:
Please note that FDIC insurance protects against the failure of a Program Bank, not the failure of PayPal. PayPal is not a bank, does not take deposits and is not FDIC insured.
When money comes in through a service like PayPal or Venmo, move it to your actual business bank account.
4 things to consider when choosing a bank
If you're in the market for a bank account, here are some things to keep in mind.
1. Features
A bank for freelancers specifically often includes features that used to require separate software: invoicing, expense categorization, and tax savings "buckets." If your bank can handle some of these tasks, that's one less subscription to manage.
Think about what you actually need. If you already use accounting software and an invoicing tool, you might not care about built-in features. But if you're just starting out and want everything in one place, a bank with these tools can make your money easier to manage.
2. Integrations
Your bank should connect easily with the other tools you use. At a minimum, look for integration with accounting software like QuickBooks or Xero. You may also need integrations with products like Gusto or Stripe.
A bank that doesn't integrate with your other tools means more manual work — downloading statements, importing transactions, reconciling by hand.
3. International payments
If you work with clients outside of your country, payments get more complicated. Some banks make international transfers straightforward. Others charge high fees or take days to process them.
If international work is a regular part of your business, look for a bank or platform (like Wise) that supports multi-currency accounts and offers reasonable exchange rates. Otherwise, you'll be relying on your invoicing software or a separate service to handle cross-border payments.
4. Customer service
This one is easy to overlook until you need it. When something goes wrong with your money — a transaction doesn't go through, a deposit is delayed, or your account shows something unexpected — you want to reach a real person quickly.
Check whether the bank offers phone support, live chat, or just a help center with email tickets. Read a few reviews about response times. You can also check complaints filed against a financial institution through the Consumer Financial Protection Bureau. A bank with great features but terrible customer service can become a real problem at the worst possible time.
7 banks and neobanks for freelancers
Here are some options worth considering. All of these are geared toward freelancers or small business owners, and most have no monthly fees on their basic plans.
- Relay: Best for managing your business cash flow
- Wise Business: Best for international payments and multi-currency support
- Bluevine: Best for high-yield interest on business checking
- Axos Bank: Best for fee-free traditional banking
- Lili: Best for built-in tax tools and expense tracking for freelancers
- Found: Best for all-in-one banking with automatic tax savings
- Your local bank or credit union: Best for in-person service and supporting your local economy
Don't settle for the first bank you try
The right bank for your freelance business is one that's easy to use and make managing your finances simpler. Unfortunately, you can't always get a feel for the bank from its website alone.
Take the time to try a few options. Test the app, send yourself a payment, poke around the online banking interface. If something feels clunky or frustrating, trust your instincts. I tried four different business banking accounts before committing to one. I opened with a small balance and tried a few features first. Only when I'd decided on the right bank did I go through the process to make the switch.
Most of these accounts are free to open with no minimum balance. Your bank is a tool you'll use every single week. It's worth taking the time to find the right one.
This article is for informational purposes only. It should not be considered Financial or Legal Advice. Consult a financial professional before making any major financial decisions.
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FAQs
Do freelancers need a business bank account?
You're not legally required to have one as a sole proprietor, but it's strongly recommended. A separate business account makes tax preparation significantly easier and gives you a clear picture of your business income and expenses.
Are neobank deposits FDIC insured?
Yes, as long as the neobank partners with an FDIC-insured bank. Your deposits are protected by the partner bank's FDIC coverage, not the fintech company itself. Check the neobank's website to confirm which bank holds your funds.
Can I use PayPal or Venmo as my business bank account?
No. PayPal and Venmo are payment processors, not banks. They're fine for receiving client payments, but you should move that money to an actual bank account rather than storing your money in your PayPal or Venmo account long-term.
What features should freelancers look for in a bank?
The basics include: no monthly fees, no minimum balance requirements, and integration with your accounting software. From there, features like built-in invoicing, expense categorization, and automatic tax savings are helpful but not necessary for every freelancer.
How do I choose a bank if I have international clients?
Look for a bank or platform that supports multi-currency accounts and offers transparent exchange rates. If international payments are only occasional, your invoicing software or a direct international wire transfer to your bank may be able to handle cross-border transactions instead.
Do I need an LLC or EIN to open a business bank account?
Not always. Many banks let you open a business account as a sole proprietor using just your Social Security number. However, some banks may require an EIN or additional business documentation, so check requirements before applying.
