How To: Select a Business Credit Card

by: Reece Freeman | ChooseWhat.com

The main and most pertinent advantage of having a business credit card is that it keeps your personal and business expenses separate.

With bank loans for businesses in short supply over the past few years, many small business owners are turning to credit cards to help start and grow their businesses. Approximately 25 million businesses in the US have no employees. This statistic relates to nearly 4 out of 5 businesses in the entire country that are run by a sole operator. Credit card companies know this fact, and are willing to supply credit cards for your business no matter how small it is.

Although it may take less time to obtain a personal credit card to use for business expenses than the time it takes finding the right business credit card for your company, business credit cards have much more advantages than personal cards.

Advantages:

• Keep personal and business expenses separate: This is essential during tax season since business expenses can be written off, of course, if you know where to find them.  If you put all of your business expenses on one credit card account, this information will always be in one place: your credit card statement. 

• Simplify expense billing: Using one business credit card for all of your expenses will make paying off the array of business purchases very easy; through one check to your credit card company.

• Get multiple cards under one business account: By getting several cards for you and your employees allows you to set different spending limits, pinpoint each employee’s expenses, and keep spending with your card if one of your employees loses their card since the cards have different numbers.

• Access to better customer service: Businesses typically spend more on their business credit cards than average people spend on their personal credit cards. As a result, credit card companies often provide better customer service for business credit card holders.

• Pay lower annual fees: American Express, for example, has an annual fee of $175 on their personal Premier Rewards Gold Card and only a $125 annual fee on the Business Gold Rewards Card.

All of these reasons are why we strongly suggest any small business owner look into the wide range of business credit cards available on the market.

1. Make sure you have the information required to apply. 

   The vast majority of business credit cards, although attached to your business’s credit, will also need you to personally guarantee the account. Most business credit cards will also require an excellent personal credit rating. The personal information that is required to apply for a business credit card includes:

   • Your Name
   • Your Personal Address
   • Phone Number
   • Date of Birth
   • Social Security Number
   • Total Household Income

   Before you go through the entire process of selecting a business credit card, it is important that you have all of the information necessary to submit an application for one. If you do not yet have any of the following info, click on the item in this list to view our guide on how to obtain it:

   • Legal Business Name
   • Business Name (that you would like to have on your card)
   • Business Address
   • Email Address
   • Industry Type
   • Company Structure
   • Annual Business Revenue
   • Years in Business
   • Number of Employees
   • Federal Tax ID

2. Distinguish which type of card you need. 

   When first researching different credit cards for your business, it’s easy to get confused by the way the terms “credit card” and “charge card” are used seemingly interchangeably throughout literature on the Internet. There are distinct differences that you should be mindful of when paying for expenses with these two types of cards.

   Credit Cards

   • Only required to make a minimum monthly payment (this is usually only a small percentage of your total balance)
   • Allows you to carry a balance
   • Card balance is charged a fixed or variable interest rate (APR)
   • Gives you flexible payment options
   • Usually no annual fee

   Charge Cards

   • Must pay off all charges each month
   • Cannot carry a balance from month to month without incurring high penalties
   • No interest charges
   • Inflexible payment options
   • Annual fees apply

3. Determine the features you care about most. 

   The importance business credit card features relates directly to which kind of card you have and how you plan on paying off your balance.

   Regular APR (Annual Percentage Rate), or interest rate, should be the most important aspect of your credit card decision if you plan on keeping a balance on your card every month. If this is the case, instead of being distracted by enticing reward plan offers, keep your focus on the interest rate your balance will be charged. Cards with great travel or cash back rewards will cost you more in the long run if you're constantly paying a high interest rate on your balance. Instead, concentrate your attention on:

   • Introductory APR Discounts – Not just the discounted rate, but the length of time this rate lasts.

   • Fixed vs. Variable Regular APR – Fixed is preferred for most people carrying a balance on a credit card since this means your interest rate won't change, but Variable rates can be beneficial too as long as you understand the range on which your interest rate can vary.

   • Balance Transfers – If you plan on transferring a balance from a current credit card onto a new one to take advantage of the Intro APR discounts, make sure the card first will let you transfer a balance and also allow you to do so at the discounted introductory rate.

     Again, the Regular APR is only the most important feature for those who plan on carrying a balance on their card.

   Rewards can also be most the beneficial feature of your credit card, especially if you plan on paying off the balance or are keeping a low balance each month. By doing this, the interest on your account should be of little concern. These rewards will seem like a big "Thank You" from the credit card issuer for paying your bill every month.

   Types of Rewards Include:

   • Cash Back
   • Airline Miles
   • Other Travel Rewards (Hotels, Car Rentals, etc.)
   • Vendor-Specific rewards

   Airline miles and other travel rewards are most beneficial to businesses with a lot of travel expenses. These types of reward cards usually give more rewards points when you use it for travel expenses such as plane tickets, car rentals, and fuel. While cash back rewards are obviously more beneficial for those businesses that do not have many travel expenses, some cards have cash back reward schedules that increase when purchasing from certain vendors.

   Always make sure you pay attention to the details of each reward plan before making your final decision on a credit card.

   Annual Fees are mainly related to business charge cards, although a few business credit cards do charge them as well. The annual fee of a card is important to calculate into your final decision when choosing a credit card since the fee may lower your interest rate or increase the amount of rewards you’ll receive.
   
   Although this might not be the most important feature when comparing credit cards, the benefits (or lack thereof) from paying an annual fee could be used as a tie-breaker between two similar cards. Most business credit cards will waive your first annual fee which could be seen as a reward by itself, especially since some annual fees are hundreds of dollars.
   
   Penalties are always helpful to know about when comparing credit cards. They are especially important to take into account for those opting to get a charge card. On charge cards, penalties are assessed every month that you fail to pay the balance in full. Not only do some charge cards have monetary penalties for not paying your balance in full, some will even suspend your charge card account if you don’t pay the balance off.
   
   On credit cards, however, penalties are only charged if you pay anything less than the monthly minimum payment or do not make the minimum payment on time, which can be a lot easier to do than paying off an entire charge card every month.

4. Compare business credit cards. 

   View our Business Credit Cards grid for the best and easiest way to compare top cards on the market in this side-by-side view.

   

   Then, read our reviews and view the extended grids that accompany these reviews to get a more complete idea of what each card offers.

5. Apply for your business credit card.
   

   Apply for the business credit card that best fits your needs. The time it takes to get approved for your credit card account varies between cards. Some credit cards offer instant approval, while others might make you wait a few weeks. In general, the better your credit rating, the faster the response time for a credit card application. Once a decision is made you will be notified by e-mail, mail, or both.

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• Do your research. Many banks and credit card companies are currently making offers, with some attractive perks that may meet your business needs. Research offers from both local banks and national credit card companies.
• Don’t get burned by special offers. There are many offers and plans available for small business owners, but pay close attention to business credit card plans with introductory offers for 0% APR (annual percentage rate). While this may be an option for an immediate, high-end purchase to support your business, research the conditions for the APR – under what conditions will the rate rise, and what are your options if it does rise. Beware of getting stuck with a high APR after the introductory period.
• Consider the rewards. Many cards will offer perks for both you and your employees including discounts with preferred vendors and airlines, as well as rewards points.
• Lay the ground rules. Make sure your employees know exactly what can and cannot be charged on the credit card. Some cards will let you adjust the credit limit on individual employee cards, as well as limit where the card can be used. 

* "Friendly Tips" Source: Better Business Bureau