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Six Factors to Consider when Choosing a Credit Card for Your Small Business

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Six Factors to Consider when Choosing a Credit Card for Your Small Business

By Caron_Beesley, Contributor
Published: October 24, 2011 Updated: March 2, 2012

Whether you are a freelancer or a small business owner, separating your personal bank accounts from your business accounts is a good practice that you need to get your arms around from the get-go.

For many business owners this starts with obtaining a business credit card.

If you think a business credit card is just about convenience, think again. Credit specialist and SBA guest blogger Marco Carbajo cites three very compelling business reasons for obtaining a business credit card:

  • It Can Prevent Intermingling of Credit – If you start intermingling personal and business credit, you negate any protection that being an LLC can afford. A business credit card, used solely for business purchases and expenses, can eliminate this risk as long as it isn’t backed by a personal guarantee.
  • A Business Credit Card Aids Good Record Keeping – The IRS requires that income and tax deductions for business and personal transactions are kept separate. Business credit cards can help in this regard because they break down expenses by category – making record keeping easier. Read more about recordkeeping and managing your small business tax obligations.
  • It Helps Build Your Business Credit – Establishing the creditworthiness of your company will stand you in good stead when it comes to seeking additional funding.

Read more from Marco in: Why Should You Apply for a Business Credit Card?

Finding the right business credit card for your company, however, requires a little more research and comparison shopping than finding one for your personal use. Here are six factors to consider:

  1. Choose the Right Type of Card – Business credit cards come in a variety of flavors. These include debit cards (tied to your business bank account), corporate cards (zero interest but monthly/annual fees), charge cards (zero interest, no spending limits, but balance must be paid off each month), business credit cards (credit limit and monthly minimum payments), prepaid cards, merchant cards, and so on.  To find the right one for your needs, do your research or talk to your bank and be sure to go over the terms of each option with a fine-tooth comb.
  2. Evaluate Interest Rates and Fees – Interest rates and teaser/promotional APR rates vary across financial institutions. Be sure to check the fine print. For example, after the promotional period is over what will the rate change to? You should also review monthly and annual fees and ask yourself what extra benefits do you get for the fee? Is it reasonable based on your potential expenditure?
  3. What Rewards Programs are Offered? – If you travel frequently for business, rewards programs that offer frequent flyer miles, airline, hotel, or car rental discounts can be very helpful. If you don’t travel much, look more for credit cards that offer rewards points towards purchases made at certain locations, such as Staples or Office Depot.
  4. What about the Online Banking Experience? – Can you pay your business credit bills online? You’d be surprised how many cards still don’t allow this transaction capability. Can you transfer funds between accounts? Does the financial institution provide monthly and annual expenditure reports so that you can track expenses by IRS categories? These are just some of the features that can make business credit card management a lot easier.
  5. Understand Repayment Terms or Grace Periods – While you should do everything you can to pay off your monthly minimums, protect yourself in advance by researching whether your card provider offers a grace period and what late payment fees you may incur if you go over this time.  Remember your business credit score is at risk if you pay late or miss minimums.
  6. Familiarize Yourself with the Application Process – Documents you’ll need to support your business credit card application include your Social Security number as well as those of anyone else in your company who would be authorized to use the card (such as a business partner or administrative assistant). You’ll also need to provide your business’s legal name and address and your business tax ID number. You may also need to provide financial documents such as profit numbers for recent fiscal years. If you are a new business owner, the bank may also require a personal guarantee that makes you personally liable for any unpaid debts on that card, even if you are an LLC. Try to avoid this if you can.

Additional Resources

About the Author:

Caron Beesley


Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley


Best 6 tips to consider. Two important things for me is Interest Rates and Reward points. Thanks Caron Beesley
I'm really on confused. Every I apply a credit card, I always rejected.
I did not your credit card , i like cash very much
Business credit cards are the easiest way to obtain bank financing for small business development projects, like building a web site that gets high search engine rankings.

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