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How to Choose the Best Credit Card for Your Business

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by Tim Parker

Last Updated Tuesday, May 18, 2021
Need a credit card for your small business? Not all business credit cards are created equally so consider these 8 points when choosing one for your business.

Choosing A Business Credit Card
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Looking for a credit card for your small business? There are plenty out there. Every major issuer has a special card for small business owners. The names might be catchy but how do you pick the right card for your business?

Do You Need a Business Credit Card?

Money isn’t pouring in yet. You have bills and expenses due today but that big check from a client is running late. A major piece of equipment broke but there isn’t enough money in your bank account to cover the cost. This is when a credit card becomes a lifeline.


As a young startup, you’re not likely to secure a line of credit from a bank or investor. Your best bet is seed money from family or friends but maybe you’ve exhausted that option or you don’t want to give up any equity in the company. A credit card is the perfect way to cover expenses when cash is running low.

Did you know that businesses have a credit file too? Your D&B (Dunn and Bradstreet) score is the business equivalent of a FICO score. In order to build your business’s credit score you have to utilize credit. Since credit is hard to secure at first, the best way to build your score is likely through the use of a credit card.

RELATED: The Complete Truth about Business Credit Cards

But be careful. Overspending can lead to disaster. Just as credit cards have driven families into bankruptcy, they can do the same with small businesses. Don’t use a credit card to buy what your business can’t afford. Use it to cover expenses until payments from customers arrive.

How to Find the Right Credit Card for Your Business

1. Be Realistic

Are you going to pay the charges in full each month? If you are, look at rewards cards. Getting a free flight simply by using your card is a great deal. There are some that offer travel rewards, cashback (in the form of statement credits), and other rewards.

But those rewards are small compared to the interest you pay if you carry over a balance. If you’re paying interest, you’re quickly wiping out any reward you receive.

If you’re going to hold a balance, first look at the interest rate. If you’re disciplined enough to not pay interest, look at the quality of the rewards.

2. Keep Yourself Honest

A credit card and a charge card are different. A charge card requires that you pay the balance in full after a certain period—often after one month. A credit card allows you to roll over the balance month to month. The American Express Plumb card is considered a charge card. It gives you 60 days to pay without any charges and offers a discount if you pay early. After 60 days, charges apply.

3. Look at the Terms

Do you travel outside of the country for your business? Make sure your card doesn’t have a foreign transaction fee. Foreign transaction fees can add up to 3% in fees to anything you buy outside of the country. If you will need to use the card out of the US, look for one that doesn’t have foreign transaction fees.  One way to find out: search on the internet for the name of the credit card and the term “foreign transaction fees”.

4. Be Careful of the Teaser Rates

That 0% introductory APR is certainly enticing but what happens after it expires? Before reading the pretty, colorful ad copy on the credit card’s home page, find the disclosure page—normally a link at the bottom. Read about the rates and fees and then go back and read about the card benefits.

RELATED: Choosing a Credit Card for Your Business

5. Dig Deep Into The Rewards Program

After deciding which type of rewards program fits you the best (travel, cashback, etc.) read the fine print. If you’re looking for travel rewards, make sure the card company offers rewards for your airline of choice. If you’re already a super-double-diamond-high-roller flyer with a certain airline, you want a rewards program that works with that airline.

If you have a lot of vehicles, a credit card that offers bonus points for gas purchases is certainly a plus.  Or, you may just want a business credit card that offers double points on all transactons.

6. How Do Extra Cards Work?

How do you get extra cards for your employees and is there a fee? Can you set spending limits on employee cards? Some business cards come with an impressive list of ways to monitor and limit employee spending. Others are nothing more than an additional authorized user.

7. What are the Penalties?

You don’t plan to make late payments but what if it happens? Do you lose your rewards points? Is there a penalty APR that goes into effect? What is the late fee? Sometimes paying bills a little late is unavoidable. As you’re shopping for a card, compare those terms and conditions as well.

8. Beware the Annual Fee

Some cards have a lot of perks—concierge services, purchase protections, free insurance for your rental car, and more. But is it worth a hefty annual fee?

Bottom Line

Credit cards are dangerous. Small business owners and startups often have to personally guarantee the credit card.  Used irresponsibly, you and your business could find yourself under irreversible financial stress. Used with caution, the card could provide a short-term solution for cash flow issues.

Just like you would a credit card for you and your family, compare multiple cards. Read more of the boring disclosures than you do the pretty advertisements. And always pay the entire balance at the end of the month.

© 2021 Attard Communications, Inc. All Rights Reserved. May not be reproduced, reprinted or redistributed without written permission from Attard Communications, Inc.


About the Author

Tim Parker is the Founder and President of The Web Group, a full service IT firm focusing on security and compliance based in Tampa, Florida. In the little spare time he has, Tim enjoys writing financial articles for major websites focusing on entrepreneurship, investing, personal finance, and retirement.


 



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