6 Tips for Choosing a Small Business Credit Card
A credit card might be a vital financial conduit for small businesses or start-ups that have trouble getting access to other funding sources. The key, however, is to use these cards wisely. As you can imagine, there are many cards to choose from. Here are a few things to keep in mind when looking for a business card.
- Don’t Get in Over Your Head You want to avoid maxing out a stack of credit cards. Ideally, you should have only 1 or 2 cards and pay them off each month, essentially using as a charge card instead of a credit card.
- Keep Business and Personal Cards Separate This just makes good business sense. Also, come tax season it will be easier and more accurate when you deduct your business expenses on your tax return. Many business cards also offer tools to help you categorize your business expenses.
- Read the Fine Print The devil’s in the details. Know your credit limits, APR, foreign transaction fees, grace periods and so on. Unlike personal cards, business cards are not covered under the Credit Card Accountability Responsibility and Disclosure (CARD) Act. This means you are more vulnerable to changes in fees, rates, and terms and conditions.
- Annual Fees It seems counter-intuitive to pay for a credit card. But by doing some rough calculations, you may determine that the benefits and rewards outweigh the annual fee.
- Control As your company grows and you issue cards to employees, you want to be able to track the spending of each one. Also, does the card have any security safeguards, such as an EMV (Europay, Mastercard and Visa) chip?
- Rewards Look for cards that match your business lifestyle. If you travel for business a lot, get a hotel, airline, or gas rewards card. If you purchase considerable office supplies and materials, look into a cash back reward card.
CreditCards.com, CardRatings.com or BankRate.com can help you compare the pros and cons of business credit cards. Credit cards can be an effective funding source for business operations as well as help you develop a positive credit history. The key is to use them responsibly and strategically.