How to Open a Nonprofit Bank Account

Why do nonprofits need a dedicated bank account?

Setting up a nonprofit bank account helps you manage your nonprofit’s finances. Here are a few key ways it helps you stay organized and keep your nonprofit compliant. 

• Separation of finances: Keeping your personal finances separate from your organization’s funds helps avoid confusion and protects you legally.
• Facilitating donations and expenses: A dedicated nonprofit checking account makes it easier to accept donations and pay business expenses related to your nonprofit’s work.
• Clear record-keeping: It’s easier to track cash flow and pay bills when everything goes through one account. It also helps with tax filings and audits.
• Building credibility with donors: A nonprofit bank account shows you’re running things professionally, which can make donors feel more confident.
• Making grant applications easier: Many grant providers require you to have a nonprofit checking account so they can transfer money directly.

Eligibility to open a nonprofit bank account

Before you head to the bank, you’ll need to make sure your nonprofit is eligible. Banks need to see that your nonprofit organization is legally set up and meets the following requirements:

• You must legally set up your nonprofit in your state. If you have a nonprofit corporation, you will file articles of incorporation. If you’re a nonprofit association, you will not file articles of incorporation, but your state may still require you to file certain documents.
• You’ll need an EIN (employer identification number). This is the number that will identify your nonprofit with the Internal Revenue Service. You can apply for a tax ID number on the IRS website, or you can hire a service to take care of it for you.
• Most states require nonprofits, whether corporations or associations, to have bylaws that describe how they’re structured and how they handle finances.
• To maintain tax-exempt status, the IRS also requires nonprofits to appoint a board of directors made up of individuals who are active in the nonprofit’s operations and finances.

How to open a nonprofit bank account in 4 steps

Once your nonprofit is ready, opening a bank account can be a pretty simple process—as long as you’re prepared. Follow these four steps to get everything set up without too much stress.

Step 1: Research and select a bank

Not all banks offer nonprofit bank accounts, and standard business banking may not have the same benefits. Those that do offer nonprofit accounts have different banking services, so it pays to shop around. Start by comparing local banks, credit unions, and online banks. Ask about things like monthly fees, service fees, balance fees, minimum balance requirements, debit card access, and whether they offer online banking, automatic bill pay, mobile deposits, and ATM transactions.

Ask whether the bank offers both nonprofit checking and savings accounts, as well as money market accounts, which you may want as you grow. A nonprofit checking account is best for handling day-to-day expenses, while a savings account can help you build a reserve. Some banks offer nonprofit-specific options with better terms than business checking, so make sure to ask upfront. 

Step 2: Gather required documentation

Once you choose a bank, find out what documents you need to bring to open your account, and who needs to be present to sign signature cards. At a minimum, you will need your certificate of formation (if you formed a corporation) and your EIN, but you might need other documents. You’ll look more professional if you bring all of the following:

• Articles of incorporation or the required documentation in your state for a nonprofit association
• EIN confirmation letter
• Your nonprofit bylaws
• Board resolution naming who can open the account, if required by your bylaws
• Government-issued ID for each person listed as a signer on the account
• Proof of address to confirm your nonprofit's location

Step 3: Schedule a meeting with the chosen bank

Next, set up a meeting to go over the details of the account. (You can do this virtually if you choose to open a nonprofit bank account online.) Confirm things like transaction limits, options to transfer money, and any monthly maintenance fees. You can also go over online and mobile banking tools and monthly statements so you can be sure you understand them.

During the meeting, you should also ask about adding or removing signers in the future, setting up alerts for large transactions, and whether the bank offers nonprofit-specific customer service. Getting clarity upfront helps you avoid surprises later and makes managing your nonprofit’s money easier.

Step 4: Complete the application process

After your meeting, you’ll fill out the account application. This step usually requires you to provide detailed information about your nonprofit, including its legal name, EIN, mailing address, and a list of authorized signers. Make sure the information matches exactly with your formation documents and IRS records to avoid delays.

You may also need to provide personal information and ID for each signer. Take the time to double-check all forms to prevent problems down the road. Once everything is filled out and reviewed, you’ll be asked to make an initial deposit—this amount varies depending on the bank, but it’s often low for nonprofits. 

How to choose the right bank for your organization

Not all banks work the same way, and finding the right one can make daily operations much smoother. Look for the following: 

• Both nonprofit checking and savings
• Low or waived monthly fees
• No minimum balance requirements
• Ability to add multiple signers
• Online and mobile banking access
• Debit card access for nonprofit checking accounts
• Access to ATM transactions if you need them
• Access to customer service with experience helping nonprofits
• Easy ways to download financial reports or export data

Tips for managing your nonprofit bank account

Once your nonprofit bank account is open, it’s important to manage it carefully. Here are a few tips:

• Be sure to keep your nonprofit finances separate from your personal finances and to keep good records of all money that comes in or goes out.
• Limit who can access the account and regularly review those permissions.
• Set up internal policies for how money is handled, including who can sign checks or approve payments from the checking account.
• Always keep sufficient available funds in your nonprofit checking and think about ways to improve cash flow.
• Use online banking to monitor activity and monthly statements, and online bill pay to stay on top of expenses.
• Reconcile your checking account every month by comparing bank statements with your own records.
• Keep up with any changes to state or federal rules that apply to nonprofit finances.
• Keep all receipts, invoices, and records stored in a safe, easy-to-access place.

Opening a bank account for a nonprofit organization is an important step that helps protect your finances and your mission. When your finances are in order, you’re free to focus more on the work that matters most: making a difference in your community. 

FAQs

Is nonprofit checking the same as a business checking account? 

Nonprofit checking accounts are a type of business checking account, but they’re tailored to the needs of nonprofits. Nonprofit checking functions similarly to business checking, letting you make cash deposits, deposit other funds, and pay expenses, but nonprofit accounts may come with lower monthly maintenance fees, fewer balance requirements, or other special features.

Can a nonprofit open a bank account before getting 501(c)(3) status?

Yes, you can usually open a bank account as long as your nonprofit is incorporated and has an EIN. However, some banks may ask for proof of tax-exempt status to offer certain benefits, like waived fees or nonprofit-specific account options. Waiting until your 501(c)(3) status is approved can make it easier to access those features and avoid having to update the account later.

Can a 501(c)(3) have a debit or credit card?

Yes, your nonprofit can have a debit card tied to its checking account. Some organizations also apply for credit approval and open a credit card to help manage regular expenses. Just be sure to have clear policies for how these cards are used.

How much money should a nonprofit have in its bank account?

There’s no fixed amount, but it’s smart to keep at least three to six months of operating expenses on hand, either in its checking account or able to be easily transferred. This helps cover unexpected costs and keeps things running smoothly during slower fundraising periods.