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Nonprofits need a safe and secure way to handle all of their income and expenses. That’s why having a designated bank and bank account is essential. But with so many options available, it can be hard to know which is the best fit for your organization.
In this blog, we’ll cover everything you need to know about choosing a bank for your nonprofit, including what to look for and our top recommendations.
How to choose a bank for your nonprofit
There are hundreds of different banks that nonprofits can use for their operations. While there is no wrong answer as to what bank to use, there are some important things to consider to choose the best bank possible:
Low costs: Nonprofits typically operate on tight budgets, so it's crucial to find a bank with low or waived fees for business accounts, transactions, and other banking services.
Convenience and accessibility: For easy access to accounts and services, consider a bank with multiple branches, ATMs, and digital banking options.
Online banking options: Nonprofits should have access to reliable online banking tools for account management, bill payment, and donor tracking.
Security: Look for banks that invest in technology to make banking compliance and robust security measures.
Nonprofit-specific loans and credit lines: Banks that understand nonprofits' unique financial structure can offer loans with more flexible terms, lower interest rates, and repayment schedules suited to nonprofit cash flow patterns.
Donation processing: Banks that offer integrated donation processing, such as credit card payment platforms, online giving solutions, and mobile apps, can streamline the donation collection process.
Cash management and payroll services: Nonprofit-friendly banks may offer payroll services, automated payment options, and cash management tools to simplify these processes and ensure compliance with regulations.
Why do I need a bank account for my nonprofit?
One of the main benefits of having a nonprofit bank account is that they can help ensure
ensure compliance, which is necessary for maintaining nonprofit status. Plus, having a nonprofit bank account simplifies the process of preparing financial statements, tax returns, and audits.
But aside from helping nonprofits maintain their compliance, a dedicated nonprofit bank account shows stakeholders that your organization is serious about its financial management and accountability.
How to open a nonprofit bank account
Opening a nonprofit bank account is usually a pretty straightforward process:
1- Choose your bank: Select a bank that offers services tailored to nonprofits. Look for a bank with low or waived fees, nonprofit-friendly services, and reliable customer service.
2- Gather documents: To open a nonprofit bank account, you'll need specific documents that prove your organization's legitimacy and compliance. These typically include:
Articles of Incorporation: A legal document that establishes your nonprofit.
Bylaws: The rules and procedures that govern your nonprofit's operations.
IRS Tax-Exempt Status: A copy of your IRS determination letter confirming your nonprofit's tax-exempt status (e.g., 501(c)(3)).
Employer Identification Number (EIN): A federal tax ID number issued by the IRS.
Board resolution: A resolution from your nonprofit's board of directors authorizing the opening of a bank account and naming the authorized signatories.
Identification for authorized signatories: Government-issued ID, such as a driver's license or passport, for each person who will have signing authority on the account.
3- Choose the type of account: Decide whether you need a basic checking account, savings account, or a combination of different. This will depend on the volume of transactions, expected deposits, and any special services your nonprofit might need.
4- Visit the bank or apply online: Some banks require you to visit a branch in person to open a nonprofit account, while others allow online applications. Contact the bank to understand their requirements and schedule an appointment if needed.
5- Complete the application: Fill out the necessary forms to open the account. Provide all the required documents and information about your nonprofit, such as its name, address, phone number, and EIN. Indicate who will have signing authority on the account.
6- Add funds to the account After the account is approved, make an initial deposit to activate it. Some banks require a minimum deposit, while others may offer fee waivers for nonprofits.
Then, once the account is open, set up the services and tools your organization might need, such as online banking, mobile banking, account alerts, and more.
Ally Bank offers some of the best rates for money market accounts with no minimum deposit or monthly fees, making it an attractive option for nonprofits looking to earn interest while maintaining liquidity. The bank's online platform is user-friendly, and it provides 24/7 customer support, which can be helpful for nonprofits that operate on varying schedules.
2- PNC - Best for waiving monthly fees
PNC Bank is known for its flexible business banking solutions, and it offers programs that allow nonprofits to waive monthly fees under certain conditions. This makes PNC an excellent choice for nonprofits looking to reduce their operational costs.
3- Chase - Best for business checking options
Chase offers a variety of business checking account options, catering to different types of nonprofits. With tiered account types, Chase can serve both small and large nonprofits, providing flexibility as organizations grow. The bank also has extensive online banking features and a large network of branches and ATMs for convenient access.
4- Bank of America - Best for in-branch banking
Bank of America has a wide network of branches across the United States, making it convenient for nonprofits to access in-person banking services. This can be particularly beneficial for organizations that prefer face-to-face interactions or must deposit large sums of cash or checks regularly.
5- Navy Federal Credit Union - Best for credit union banking
While primarily serving military personnel, Navy Federal Credit Union extends its services to nonprofits and offers competitive rates, lower fees, and a community-oriented approach. Credit unions like Navy Federal often have a strong focus on customer service and community involvement, making them appealing to nonprofits that value personal relationships and localized support.
Nonprofit banking FAQs
The number of bank accounts a nonprofit should have depends on its size, complexity, and financial management needs. Generally, nonprofits have at least two accounts:
Operating account: This is the primary account for day-to-day transactions like deposits, withdrawals, and payments for operational expenses.
Savings/reserve account: This account holds funds for emergencies, reserve funds, or specific projects. It can also earn interest and provide a financial cushion.
Some nonprofits may also have additional accounts, like those for grants, restricted funds, or endowments, to maintain clear financial separation for different funding sources.
There is no legal limit on how much money a nonprofit can keep in the bank.
However, nonprofits must demonstrate that they are using funds in line with their mission and not hoarding money. Large cash reserves should be justifiable, such as for future projects, endowments, or contingencies.
A nonprofit should have a business checking account as its primary operating account. This account is designed to handle business-related transactions and usually includes features like check-writing, debit cards, and online banking. Additionally, a nonprofit may need:
Savings account: For reserve funds or restricted donations.
Money market account: Offers higher interest rates while maintaining liquidity.
Certificate of deposit (CD): Ideal for long-term reserves with fixed interest rates.
No, a nonprofit should not use a personal bank account. Mixing personal and nonprofit funds can lead to legal and financial issues, including loss of nonprofit status and IRS scrutiny. Nonprofits must maintain clear financial separation to demonstrate accountability and transparency.
To open a bank account for a nonprofit, you'll need several key documents and information:
Articles of Incorporation: Proof that your nonprofit is a registered entity.
Bylaws: The rules governing your nonprofit.
Employer Identification Number (EIN): A unique tax ID from the IRS.
IRS tax-exempt status: A copy of your IRS determination letter if applicable.
Contact information: Address, phone number, and email for your nonprofit.
Start fundraising for free with Zeffy
Once your nonprofit is up and running, Zeffy can help you fundraise for free. From managing donors to creating text-to-donate campaigns, nonprofits can organize all of their charitable activities in one central place — without ever having to pay a cent in fees.
Top 10 Nonprofit Accounting Software Picks for 2024
Is your organization struggling to manage donations and finances? This guide to the top accounting software will simplify your finances with top features, pricing, reviews, and more.
Learn about nonprofit accounting processes, regulations, compliance, and best practices. Grab all the details you need to know to run efficient accounting for your mission.
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