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What to Look for in a Small Business Credit Card

Posted: May 29, 2017 at 8:58 am   /   by   /   comments (0)

When you launch a startup, you are probably going to find yourself with a lot of expenses right off the top.  That means that you may find yourself in need of a credit card for your small business.

Choosing a small business credit card is not so different from choosing a personal credit card.  A lot of the considerations which are important for one apply to the other as well.  But instead of thinking about your personal lifestyle and needs, you will be evaluating your options in relation to your business lifestyle and needs.

First Of All … Should You Use a Personal Credit Card?

You might be wondering, “Do I even need a small business credit card?  Why can’t I just stick with the personal credit card I am already using for my other purchases?”

It’s a legit question, and one worth examining before we talk about what to look for in a small business credit card.

There are pros and cons in both directions.  If you go with a personal credit card, you might qualify for special protections which are unavailable for business credit cards.

Personal cards give you more forewarning before interest rates jump and introductory rates are set in stone.  Your fees are likely going to be lower, and you can use the personal card to keep boosting your own credit score (business credit cards usually have no impact on your score).

Business cards have their benefits too, however.  They make it a breeze to keep your personal and business transactions separate.  You also can distribute business cards to your employees; obviously you cannot do that with your personal card.  A business card has a higher spending limit, and you might get access to more flexible plans for repayment if you need them.

What About a Charge Card?

Another alternative to a business credit card is a charge card.  This is a card which you can use for short-term credit.  Within 30 days or so, you have to repay the entire amount.  Some business owners may find this is all they need to get by.

You will need to think about your priorities and needs to figure out which option makes the most sense.  But for a lot of small companies, a business credit card is the answer.

Do You Qualify for a Small Business Credit Card?

Not sure you qualify for a small business credit card because you are a sole proprietor, freelancer or contractor?  You do not need to own a corporation, LLC, or anything fancy to get one.  Generally you just need a name and social security number or EIN—as well as your DBA (if applicable).

Important Features to Look For In a Small Credit Business Card

Now that you know more about small business credit cards as well as your other options, here is what you should look for if you do decide to apply for one.

1.  Rewards that will actually be useful to your business.

When you shop for a personal credit card, you don’t just pick the card with the most rewards—you pick the card with rewards you are most likely to use.

You should do the same when shopping for a business credit card.  Buy a lot of office supplies?  There are cards out there which will reward you with points for doing so.  Go on a lot of business trips?  Look for travel-related rewards.

You can even find business credit cards that give you cash-back on your utilities expenses.  This is great if you spend a lot of time on the phone.

Do you drive all around town in a company vehicle?  Gas rewards can save you a ton of money.  If you wine and dine your customers, consider a card which rewards you for spending money at shops and restaurants.

On the other hand, not everyone needs rewards.  If you are a freelancer and you do most of your work online, you may already be conducting business with few expenses.  So you might instead want to look for other great features like a low APR or no annual fees (see below).

2.  A low APR (assuming you will be carrying a balance).

While a low APR is a great feature, how important it is depends on how you are going to be using your business credit card.  If you will be leaving a balance on there most of the time, then it may be very important.  But if you believe you will have it paid off most of the time, other features (like rewards) may matter more.

3.  Low fees—unless the benefits of the fees are worth it.

If you can get away with a card with a low annual fee (or no annual fee), definitely go for it.  Obviously fees are something that none of us enjoy.  If your business expenses are pretty low, avoiding a card with a high annual fee could be very beneficial to your bottom line.

Here is the thing, though—cards with low or no annual fees are often pretty paltry in the rewards department.  You may very well find that you will save more money with a card that has a higher annual fee.  If the sum total of the rewards adds up to more than the cost of the fee, it will cut your expenses down over the course of the year.

Conclusion: The Right Small Business Card Can Streamline and Reduce Your Expenses

There are a lot of excellent options out there if you decide that a small business credit card may be the right choice for your business.  But finding the right card for you means evaluating your needs.

So take a close look at your expenses before you compare the best small business cards.  Figure out whether a low APR, low annual fees, or high rewards are most important to you—and which kinds of rewards you need most.  You will then be ready to apply for the perfect card for your small business!

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