How to Choose the Right Business Credit Card

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If you own a business, even a very small one, it’s smart to keep at least one business credit card in your wallet. While picking a business credit card is similar to finding the card that’s just right for your personal use, you’ll be looking at your options through a different lens. 

To feel confident in your choice, follow these steps.

1. Understand How Business Credit Cards Work

First, make sure you’re clear on the key differences between business cards and personal cards:

  • Credit limits are often higher. According to research by Experian, small business owners had an average of $56,100 in total available credit in 2015, more than double the average for consumers.
  • Perks are often tailored to small business owners and may include higher rewards for spending in categories such as office supply stores, restaurants or fuel purchases.
  • While you will typically have to personally guarantee the purchases you make on a small business card, many cards don’t report activity to personal credit reports as long as payments are made on time. Many do, however, report to commercial credit reporting agencies, which can help you build up your credit history as a business
  • Business cards don’t offer all the consumer protections that you may be used to, including safeguards against rate increases on existing balances or limits on penalty fees.You should use your card for business purchases only and aim to pay your debts back regularly and on-time.

Small business credit cards are typically issued based on the business owner’s personal credit scores and finances. While good credit is recommended for many business cards, there are some available to applicants with fair credit scores.  

2. Identify Favorite Brands 

Next, go through your business expenses and look at trends among the retailers and travel providers you use the most. Do you prefer one airline? Do you insist on staying at the same chain of hotels? Are you partial to one warehouse or supplier? Investigate whether these companies have co-branded business credit cards.

3. Categorize Spending

Now, go through all your spending for the past few months to a year. Your current credit card and bank statements should make it relatively simple for you to review how you spend, or you may have an accounting program.

Does a significant portion go toward fuel or office supplies? Do you have big bills with internet service providers or cell phone carriers? What about future expenses? Are you about to make a big investment in computer equipment, inventory, or staff? Rank these spending categories from greatest to least, including your projected spending.

4. Weigh Card Costs

The annual fee is one of the most important cost considerations with a credit card. For a business card, just like a personal card, annual fees range from nothing to hundreds of dollars.

It's assumed that the pricier cards will give you the most benefits, such as access to exclusive airport lounges or reimbursement for airline fees. But that's not always the case, and the perks have to be valuable to you in particular. Make sure you’ll more than recoup the cost of the annual fee with the benefits offered. 

In addition, compare these terms: 

  • Balance transfer fee: If you’re transitioning a big business balance from your personal card, whether this fee is 3% or 5% can make a big difference. And some cards may not allow balance transfers.
  • Foreign transaction fee: If you buy inventory from overseas or have to fly abroad to visit clients, make sure you choose a card that doesn’t charge this fee (often around 3% of the purchase amount.) 
  • Cash advance fee: If your business needs a quick cash infusion, whether the cash advance fee is 3%, 4% or 5% of the transaction amount can be significant. 
  • Interest rate (APR) on purchases, balance transfers, and cash advances: If your business is in growth mode and you have to carry a balance—even for just a few months—comparing these rates is especially important. 

5. Consider Introductory Offers

Like personal credit cards, many business cards offer bonuses for new cardholders who meet a particular spending threshold within the first three months. It might be 50,000 reward miles or a $250 statement credit toward travel purchases. 

These bonuses can easily offset an annual fee and can be quite appealing. But remember that they are a one-shot deal, so you should feel good about the ongoing benefits and rewards of the card.

Introductory APR offers should also be considered if you need to finance large purchases or startup costs. These may offer as much as 12 months interest-free. Just make sure you compare ongoing APRs if you think you may take on more debt than you can afford to pay back during the promotional period. 

6. Create Your List and Choose 

Once you’ve gathered this information, you’re ready to narrow down your list and choose the card that’s best for your business. Focus on the factors that will have the most impact on your situation:

  • If you plan to carry a balance on your card, choose a card with a low introductory APR and/or ongoing APR to minimize interest costs.
  • If you’re able to pay in full each month, focus on rewards. Look for cards that have higher rewards on some or all of your top three spending categories. Or, if you have a strong loyalty to a particular hotel or airline, consider that company’s co-branded card. If nothing stands out, a cash-back card may be a better bet.

Bottom Line

Picking the right card may require an extensive pros and cons list. Don’t go into any financial decision—even something as common as choosing a credit card—lightly. Make the right choice, and your business credit card can become an important tool for organizing your budget, earning rewards, or offering you leverage when you need it most. 

Article Sources

  1. Experian Information Solutions. "The Face of Small Business," Accessed Oct. 30, 2019. 

  2. Discover Financial Services. "Starting a Business on Your Own," Accessed Oct. 30, 2019.

  3. National Bureau of Economic Research. "Regulating Consumer Financial Products: Evidence From Credit Cards," Pages 2, 8 and 9. Accessed Oct. 30, 2019.