How do we choose a bank for our HOA's accounts?

By OurHOA · General information · Revised October 31, 2026

How an HOA board picks a bank: account type, FDIC limits, dual approval and positive pay, fees, questions to ask, a scoring sheet and a sample motion.

Part of the HOA board handbook: treasurer and money.

Pick the bank for its controls, then its fees

The right bank for a self-managed HOA is one that lets two people control every payment, insures every dollar the association keeps there, and makes it easy to get owner payments in. Fees and interest rates come after that. A bank that saves the association $15 a month but lets one treasurer send a wire alone is a bad trade, because a single fraudulent payment can wipe out years of savings. Most boards choose a bank once and then live with it for a decade, so spend a month on the decision and put the reasons in the minutes. This guide covers the comparison. The switch itself, with owner notices and closing the old account, is in our guide on how to move HOA accounts to a new bank. Rules on who may open accounts and sign for the association come from your bylaws and state law, and they vary by state. This is general education, not legal or financial advice.

Write down what the association needs before you call anyone

Banks quote fees against a profile, so build one first. Take the last 12 months of statements and count four things: deposits per month, outgoing payments per month, the highest balance in each account, and how owners pay. A typical 70-home association with $225 quarterly dues might show 70 to 90 deposits in a dues month and a handful in the other months, about 25 outgoing payments a month, an operating balance that peaks near $45,000, and reserves of $180,000. Then list the accounts you want: operating checking, a reserve account, and maybe a separate account for a special assessment or a large project. Note how the money arrives. If most owners pay through an online portal, the bank needs to accept the processor's deposits without trouble. If a third still mail checks, you need mobile or remote deposit, a lockbox, or a branch near whoever does the deposits. Write this on one page. Every bank gets the same page, which makes the quotes comparable.

Account type and the paperwork banks ask for

Open business accounts in the association's exact legal name under its own EIN. Many banks also sell nonprofit checking with lower fees, and it is worth asking about, but find out what qualifies. Some banks reserve those accounts for 501(c)(3) charities, and most HOAs are not one. Many file Form 1120-H, which the IRS describes as the return a homeowners association files to take advantage of certain tax benefits. Our guide on preparing Form 1120-H for a small HOA covers that filing. Expect the bank to ask for the articles of incorporation, the EIN letter, a board resolution naming the signers, and ID for each signer. Ask each bank for its account opening checklist in writing so you know whether a second trip will be needed. Credit unions are an option too, but a credit union can serve only the people and groups in its field of membership, which its charter defines. Ask early whether the association qualifies, before anyone fills out an application.

Insurance limits and where the reserves will sit

The FDIC insures an association's deposits up to $250,000 per corporation, partnership or unincorporated association at each bank. All of the association's accounts at that bank count toward one limit, so an operating account and a reserve account at the same bank share the $250,000. Federally insured credit unions work the same way. Under 12 CFR 745.6, accounts of an association engaged in an independent activity are insured as one unit, up to the standard maximum in the aggregate. Before you shortlist any bank, look it up in the FDIC's BankFind tool, or check a credit union on the NCUA's site, and save a screenshot for the file. If operating cash plus reserves will top $250,000 at one institution, the bank choice and the reserve plan have to be made together. Ask each bank whether it offers a reciprocal deposit program that spreads large balances across other insured banks, and what it charges. Our guide on how an HOA should invest its reserve funds explains the options for splitting reserves and laddering CDs.

Online banking controls are the real test

This is where small business banking differs most from bank to bank, and where the board's choice matters most. Ask for a live demo, not a brochure, and check five things. First, separate logins for each officer, with no shared password. Second, dual control: one person sets up an ACH payment or wire and a second person approves it before it goes. Third, permission levels, so a bookkeeper can view and prepare but not release payments. Fourth, positive pay for checks and an ACH debit block or filter, so only payees you approve can pull money. Fifth, view-only access for a director who is not a signer, so someone outside the payment chain can watch the account. Two pieces of law make these settings more than a nice extra. Regulation E's consumer protections for unauthorized electronic transfers apply to accounts set up primarily for personal, family or household purposes under 12 CFR 1005.2(b)(1), so an association's business account does not get them. And for wires and similar payment orders, the funds transfer article of the UCC lets a bank treat an unauthorized order as the customer's when it followed an agreed, commercially reasonable security procedure in good faith. If the customer turns down a reasonable procedure the bank offered and picks a weaker one in writing, the weaker one is deemed commercially reasonable. That is Texas Business and Commerce Code section 4A.202, Florida Statutes section 670.202(3), and C.R.S. 4-4.5-202 in Colorado. In plain terms, if the board declines dual approval because it is a hassle, the association may carry the loss when a fake payment goes out. Accept every control the bank offers, and read the funds transfer agreement before anyone signs it.

Questions to ask every bank

Send the same list to three banks and ask for written answers. Copy and adjust: 1. Which account types can a homeowners association with our profile open, and what does each cost per month? 2. What balance waives the monthly fee, and is it measured as a daily minimum or a monthly average? 3. Can we require two users to approve every ACH payment and wire, and is that included or a paid add-on? 4. Do you offer check positive pay and ACH debit blocks to accounts our size, and at what price? 5. Can a non-signing director get view-only online access? 6. What do you charge for mobile deposit, remote deposit with a scanner, and a lockbox, and what are the daily deposit limits? 7. Do deposits from our payment processor arrive in one lump or itemized? 8. What are your fees for outgoing wires, stop payments, returned deposits and paper statements? 9. What rate do you pay on a reserve savings or money market account, and on 12-month and 24-month CDs? 10. Who is our contact when something goes wrong, and can we reach that person by phone? Answers to questions 3 and 4 tell you more about the bank than the rest put together.

Compare fees against a real month

Fee schedules are hard to compare in the abstract, so price your profile. Take the dues month from your one-page profile and run it through each bank's schedule: monthly maintenance, per-item deposit charges past any free allowance, ACH origination fees on vendor payments, the positive pay fee, remote deposit or lockbox charges, and any paper statement fee. Then do the same for a quiet month and average them. A bank with a $25 monthly fee and free positive pay can cost less than a $10 account that charges $30 a month for positive pay and 50 cents per deposited item. Next, look at the interest on reserves. On $180,000, a gap of one percentage point is $1,800 a year, which often outweighs every fee on the operating side. Keep the comparison on one spreadsheet with one column per bank, and attach it to the minutes. Do not chase a promotional rate that drops after six months. Ask what the standard rate is and score that.

A sample scoring sheet and motion

Score each bank from 1 to 5 in five areas and multiply by the weight. Payment controls (dual approval, positive pay, permission levels), weight 3. Annual cost for your profile, weight 2. Deposit options that fit how owners pay, weight 2. Insurance coverage and reserve options, weight 2. Service and a named contact, weight 1. The highest possible total is 50. Two directors should score separately and then compare. If a bank scores a 1 or 2 on payment controls, drop it no matter how the rest adds up. Sample motion: 'Move to select First County Bank as the association's depository for its operating and reserve accounts, based on the comparison attached to these minutes; to require dual approval for all ACH payments and wires and to enroll in check positive pay and ACH debit filtering; to name the president, treasurer and secretary as authorized signers; and to direct the treasurer to open the accounts and report at the next meeting.' A realistic schedule is two weeks to build the profile and send questions, two weeks for answers and demos, and a vote at the next regular meeting.

Mistakes boards make when choosing a bank

Choosing the bank where a director works or banks personally, without saying so on the record. Disclose the connection, follow your conflict-of-interest policy, and let the other directors score that bank. Picking on interest rate alone and finding out later that the bank has no dual approval for small business accounts. Setting up one shared login so the treasurer and president can both get in. Turning down a security procedure the bank offers because it slows down payments. Opening an account under a director's Social Security number to save time, which puts the money and the tax reporting in the wrong name. Ignoring how deposits happen, so a treasurer who lives 20 miles from the nearest branch ends up holding checks for weeks. Letting one person do the whole selection and account setup alone. Two directors should sit in on the demo, and both should sign off on the online banking settings before the first payment goes out.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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