A business credit card is an essential financial tool to keep personal and business expenses separate.
When you search for a new business credit card, it’s crucial to evaluate the offers available to make sure you get the best business credit card possible for your company. Remember, business credit cards are not a one size fits all – you need to decide which one best fits the needs of your company. But how do you accomplish this without missing anything?
When you review a business credit card offer, here are five things you should look out for:
Card Type – There are a variety of cards that are designed for specific purposes so it’s important that you determine if the card offer meets your needs. The most common type of business credit cards you’re most likely to come across are cards with “teaser” intro rates, low interest rate cards, cards with rewards programs, airline mile/ frequent flier cards, unsecured business credit cards, secured cards and prepaid cards.
For example, if you travel regularly for business then you may want to consider an airline business credit card. This type of card provides the benefit of earning airline miles on every purchase you make. Depending on the card issuer, the miles you earn can be redeemed for travel expenses such as flights, hotel stays, etc.
Benefits & Perks – As a business owner you most likely have plenty of expenses that can be charged to a business credit card. Be on the lookout for cards where you can pick up points and cash back rewards. From earning reward rates on travel, advertising, internet and phone services, and shipping services; you are likely to benefit tremendously through reward programs. If you spend a significant amount in certain categories listed with a card offer then the return may be well worth it.
Intro/Annual Percentage Rate (APR) – Business credit cards that offer a 0% introductory rate on new business purchases, balance transfers, or both offer an inexpensive way to finance your purchases. This provides your company more time in which to pay for things such as inventory before interest kicks in. While most 0% APR introductory periods are different, many card issuers will offer at least six months without interest.
Other things to watch out for are card issuers offering low-interest rates. This can save you cash each month on finance charges. With this type of business credit card, you can lower the cost of high-interest credit card payments and pay down the principal balance of your credit card debt faster.
Applicable Fees – Know the fees that are associated with the business credit card you are considering. Some fees are worth paying for while others are not and most are avoidable. Does it charge an annual fee? If you travel abroad then find out if it charges a foreign transaction fee. How about late payment fees and cash advance fees? Remember, business credit cards with annual fees tend to offer higher reward programs and sign-up bonuses than those cards with no annual fee.
Credit Reporting – In almost every case when you apply for a business credit card, the card issuer will check the personal credit of the business owner to determine creditworthiness. Even though you’re applying for a business credit card using an EIN, your personal credit report is almost always used in the credit decision.
Aside from incurring a hard inquiry, the new business credit card account will show up on your consumer credit report as an additional liability in your name. And, all the balances and payments on the business credit card will show up on your personal credit report as well.
It's vital to consider applying for business credit cards that report only to the business credit reporting agencies. Business credit reporting matters much more than you think. It not only protects your personal credit but also helps establish the credit identity of your business.
As a startup or existing business, having access to a business credit card is important. Let these five factors provide a guideline so you can select the right business credit card offer for your company.