Business Credit Cards

Choosing a Business Credit Card

When you first start your business, you might use your personal credit card for business expenses. This is a common occurrence in the early stages of many businesses, but it can have drawbacks eventually, such as maxing out your personal credit line with business expenses or creating an accounting nightmare as you try to keep your business expenses separate from your personal spending.
Business credit cards, which are used exclusively for the purposes of your business, can solve these problems as well as others. This card is a credit card in the name of your business for which you qualify using your personal credit history. The advantages of a business credit card include:

• Improved management of expenses. Your bookkeeping is simpler because business expenses are consolidated onto your business credit card. Many card issuers offer options for you to download your business credit card statements directly into your accounting software.
• Increased total spending power. You aren’t limited to your personal credit card spending line in funding your business expenses.
• Control of employee spending. You can request additional business credit cards for your employees with preset spending limits that you have specified.

Selecting the best business credit card may take a bit more research than choosing one for personal use, but the time is well spent. In recent years, the variety of offerings has increased as more issuers enter the lucrative business card market. Some of the most important considerations when selecting a business credit card include initial fees, annual percentage rates (APRs) and reward programs.

The initial fee associated with a business credit card – which often can be as low as zero – is straightforward and simple to compare among card offerings. However, sometimes it is financially advantageous to consider a card with a higher initial fee if there are superior benefits, such as a lower APR or a more generous reward program.

The annual percentage rate associated with a business credit card is the amount of interest you will be charged on card balances you do not fully pay off each month. Try to estimate how often you will be paying your balance in full versus carrying a balance over months or longer to determine the importance of the APR in your decision. Some cards boast a low introductory APR, but this is only significant should you plan to carry a large balance on your card during the introductory period. A business credit card with a 0% APR for the first six months that increases to 21% is inferior to a card that offers a constant 9% APR, for instance.

Credit card issuers introduce new reward programs seemingly every day. Often these programs can be very generous and can save your business a substantial amount of money, with features like:

• Straight cash back, typically in the range of 1% to 5%
• Discounts with specified vendors
• Airline frequent flyer program miles
• Rebates on office supplies or gas

The business credit card you choose can have many financial implications for your business, so be sure to give the process the attention it deserves.

Posted on: April 3, 2012, by :